10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT

PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Commission file number: 1-31227

COGENT COMMUNICATIONS GROUP, INC.

(Exact name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of Incorporation) 52-2337274
(I.R.S. Employer Identification No.)

1015 31^st Street N.W.

Washington, D.C. 20007

(Address of principal executive offices)

(202) 295-4200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  o    No  x

As of June 30, 2004, 802,142 shares of the registrant’s common stock, par value $0.001 per share, were outstanding. As of that date, the aggregate market value of the common stock held by non-affiliates of the registrant was $4,652,425 based on a closing price of $5.80 on the American Stock Exchange on such date. Directors, executive officers and 10% or greater shareholders are considered affiliates for purposes of this calculation but should not necessarily be deemed affiliates for any other purpose.

On March 25, 2005, the Company had 32,398,460 shares of common stock outstanding.

Documents Incorporated by Reference

Portions of our Definitive Information Statement for the 2005 Annual Meeting of Stockholders to be filed within 120 days after December 31, 2004 are incorporated herein by reference in response to Part III, Items 10 through 14, inclusive.

COGENT COMMUNICATIONS GROUP, INC.

FORM 10-K ANNUAL REPORT

FOR THE YEAR ENDED DECEMBER 31, 2004

TABLE OF CONTENTS

		Page
	Part I—Financial Information
Item 1	Business	3
Item 2	Properties	15
Item 3	Legal Proceedings	16
Item 4	Submission of Matters to a Vote of Security Holders	16
	Part II—Other Information
Item 5	Market for Registrant’s Common Equity and Related Stockholder Matters	17
Item 6	Selected Consolidated Financial Data	18
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	37
Item 8	Financial Statements and Supplementary Data	38
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	77
Item 9A	Controls and Procedures	77
Item 9B	Other Information
	Part III
Item 10	Directors and Executive Officers of the Registrant	78
Item 11	Executive Compensation	78
Item 12	Security Ownership of Certain Beneficial Owners and Management	78
Item 13	Certain Relationships and Related Transactions	78
Item 14	Principal Accountant Fees and Services	78
	Part IV
Item 15	Exhibits and Financial Statement Schedules	78
Signatures		91

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future results and events. You can identify these forward-looking statements by our use of words such as “anticipates,” “believes,” “continues,” “expects,” “intends,” “likely,” “may,” “opportunity,” “plans,” “potential,” “project,” “will,” and similar expressions to identify forward-looking statements, whether in the negative or the affirmative. We cannot guarantee that we actually will achieve these plans, intentions or expectations. These forward-looking statements are subject to risks, uncertainties and other factors, some of which are beyond our control, which could cause actual results to differ materially from those forecast or anticipated in such forward-looking statements.

You should not place undue reliance on these forward-looking statements, which reflect our view only as of the date of this report. We undertake no obligation to update these statements or publicly release the result of any revisions to these statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

2

PART I

ITEM 1.BUSINESS

Overview

We are a leading facilities-based provider of low-cost, high-speed Internet access and Internet Protocol communications services. Our network is specifically designed and optimized to transmit data using IP. IP networks are significantly less expensive to operate and are able to achieve higher performance levels than the traditional circuit-switched networks used by our competitors, thus giving us clear cost and performance advantages in our industry. We deliver our services to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations through over 8,700 customer connections in North America and Europe.

Our primary on-net service is Internet access at a speed of 100 Megabits per second, much faster than typical Internet access currently offered to businesses. We offer this on-net service exclusively through our own facilities, which run all the way to our customers’ premises. Because of our integrated network architecture, we are not dependent on local telephone companies to serve our on-net customers. This allows us to earn much higher gross profit margins on our on-net business. Our typical customers in multi-tenant office buildings are law firms, financial services firms, advertising and marketing firms and other professional services businesses. We also provide on-net Internet access at a speed of one Gigabit per second and greater to certain bandwidth-intensive users such as universities, other ISPs and commercial content providers.

In addition to providing our on-net services, we also provide Internet connectivity to customers that are not located in buildings directly connected to our network. We serve these off-net customers using other carriers’ facilities to provide the “last mile” portion of the link from our customers’ premises to our network.

We also operate 30 data centers comprising over 330,000 square feet throughout North America and Europe that allow customers to colocate their equipment and access our network, and from which we provide managed modem service.

We have created our network by purchasing optical fiber from carriers with large amounts of unused fiber and directly connecting Internet routers to the existing optical fiber national backbone. We have expanded our network through 13 key acquisitions of financially distressed companies or their assets at a significant discount to their original cost. The overall impact of these acquisitions on the operation of our business has been to extend the physical reach of our network in both North America and Europe, expand the breadth of our service offerings, and increase the number of customers to whom we provide our services.

Recent Developments

In February 2005, the holders of our preferred stock elected to convert all of their shares of preferred stock into shares of our common stock, which we refer to as the Equity Conversion. As a result, we no longer have any shares of preferred stock outstanding.

On February 14, 2005, we filed a registration statement on a Form S-1 (Reg. No. 333-122821) with the Securities and Exchange Commission relating to the sale of up to $86.3 million of our common stock in an underwritten public offering (the “Public Offering”). In connection with the Public Offering, our board of directors and holders of our securities holding the requisite number of common shares approved a 1-for-20 reverse stock split of our common stock. The reverse stock split was effected on March 24, 2005 and the 648 million shares of our common stock outstanding after the Equity Conversion were converted into

3

32.4 million shares of our common stock (the “Reverse Stock Split”). Unless otherwise indicated, all share information in this report reflects the Reverse Stock Split.

On February 24, 2005, we issued a subordinated note in the principal amount of $10.0 million to Columbia Ventures Corporation. The note was issued pursuant to a Note Purchase Agreement dated February 24, 2005. The note has an initial interest rate of 10% per annum and the interest rate increases by one percent on August 24, 2005, six months after the note was issued, and by a further one percent at the end of each successive six-month period up to a maximum of 17%. Interest on the note accrues and is payable on the note’s maturity date of February 24, 2009. We may prepay the note in whole or in part at any time. The terms of the note require that we pay all principal and accrued interest upon the occurrence of a liquidity event, which is defined as an equity offering in which we raise at least $30 million in net proceeds. Our Public Offering would constitute a liquidity event under the note. Accordingly, we will be required to use a portion of the proceeds of the Public Offering to repay the principal and accrued interest on the note. The note is subordinated to our debt to Cisco Systems Capital in the amount of $17.0 million as well as up to $10.0 million in debt under our accounts receivable line of credit described below. Columbia Ventures Corporation is owned by one of our directors, Kenneth D. Peterson, Jr., and is a holder of approximately 9.6% of our common stock.

In March 2005 we entered into a $10.0 million loan agreement with Silicon Valley Bank relating to a loan facility that provides us with a line of credit. On March 18, 2005, we borrowed $10.0 million under the line of credit of which $4.0 million is restricted and held by Silicon Valley Bank. We refer to this facility as our line of credit. The loans under the line of credit bear an interest rate of prime plus 1.5% per annum and may, in certain circumstances, be reduced to the prime rate plus 0.5%. The line of credit matures on January 31, 2007. Our obligations under the line of credit are secured by a first priority lien in certain of our accounts receivable and are guaranteed by all of our material domestic subsidiaries. The loan agreement and related agreements governing the line of credit contain certain customary representations and warranties, covenants, notice provisions and events of default.

Our Network

Our network is comprised of in-building riser facilities, metropolitan optical networks, metropolitan traffic aggregation points and inter-city transport facilities. We deliver a high level of technical performance because our network is optimized for Internet protocol traffic. It is more reliable and less costly for IP traffic than networks built as overlays to traditional telephone networks.

Our network serves over 75 metropolitan markets in North America and Europe and encompasses:

·over 800 multi-tenant office buildings strategically located in commercial business districts;

·over 200 carrier-neutral Internet aggregation facilities, data centers and single-tenant buildings;

·over 150 intra-city networks consisting of over 8,400 fiber miles;

·an inter-city network of more than 21,000 fiber route miles; and

·three leased high-capacity circuits providing a transatlantic link between the North American and European portions of our network.

We have created our network by purchasing optical fiber from carriers with large amounts of unused fiber and directly connecting Internet routers to the existing optical fiber national backbone. We have expanded our network through key acquisitions of financially distressed companies or their assets at a significant discount to their original cost. Due to our network design and acquisition strategy, we believe we are positioned to grow our revenue and increase profitability with minimal incremental capital expenditures.

4

Inter-city Networks

The North American portion of our inter-city network consists of two strands of optical fiber that we have acquired from WilTel Communications and 360networks under pre-paid IRUs. The WilTel fiber route is approximately 12,500 miles in length and runs through all of the metropolitan areas that we serve with the exception of Toronto, Ontario. We have the right to use the WilTel fiber through 2020 and may extend the term for two five-year periods without additional payment. To serve the Toronto market, we lease two strands of optical fiber under pre-paid IRUs from affiliates of 360networks. This fiber runs from Buffalo to Toronto. The 360networks IRUs expire in 2020, after which title to the fiber is to be transferred to us. While the IRUs are pre-paid, we pay WilTel and affiliates of 360networks to maintain their respective fibers during the period of the IRUs. We own and maintain the electronic equipment that transmits data through the fiber. That equipment is located approximately every 40 miles along the network and in our metropolitan aggregation points and the on-net buildings we serve.

In Spain we have approximately 1,300 route miles of fiber secured from La Red Nacional de los Ferrocarriles Espanoles. We have the right to use this fiber pursuant to an IRU that expires in 2012. In France, the United Kingdom, Belgium, the Netherlands and Switzerland, we have approximately 5,400 route miles of fiber secured from Neuf Telecom and Telia. We have the right to use the Neuf Telecom fiber pursuant to an IRU that expires in 2020. In Germany and Austria, we have approximately 1,800 route miles of fiber secured from MTI and Telia. We have the right to use the MTI fiber pursuant to an IRU that expires in 2019. We have the right to use all of our Telia fiber pursuant to an IRU expiring in 2011 with an option to extend to 2019.

Intra-city Networks

In each North American metropolitan area in which we provide high-speed on-net Internet access service, the backbone network is connected to a router connected to one or more metropolitan optical networks. These metropolitan networks also consist of optical fiber that runs from the central router in a market into routers located in on-net buildings. The metropolitan fiber runs in a ring architecture, which provides redundancy so that if the fiber is cut data can still be transmitted to the central router by directing traffic in the opposite direction around the ring. The router in the building provides a connection to each on-net customer.

The European intra-city networks for Internet access service use essentially the same architecture as in North America, with fiber rings connecting routers in each on-net building we serve to a central router. While these intra-city networks were originally built as legacy networks providing point-to-point services, we are using excess capacity on these networks to implement our IP network.

Within the North American cities where we offer off-net Internet access service, we lease circuits, typically T1 lines, from telecommunications carriers, primarily local telephone companies, to provide the last mile connection to the customer’s premises. Typically, these circuits are aggregated at various locations in those cities onto higher-capacity leased circuits that ultimately connect the local aggregation route to our network. In Europe, we offer off-net Internet access service through leased E1 lines and we have begun to deploy off-net aggregation equipment across our network.

In-Building Networks

We connect our routers to a cable containing 12 to 288 optical fiber strands that typically run from the basement of the building through the building riser to the customer location. Service for customers is initiated by connecting a fiber optic cable from a customer’s local area network to the infrastructure in the building riser. The customer then has dedicated and secure access to our network using an Ethernet connection. Ethernet is the lowest cost network connection technology and is used almost universally for the local area networks that businesses operate.

5

Internetworking

The Internet is an aggregation of interconnected networks. We interconnect our network with over 420 other ISPs at approximately 40 locations. We interconnect our network through public and private peering arrangements. Public peering is the means by which ISPs have traditionally connected to each other at central, public facilities. Larger ISPs also exchange traffic and interconnect their networks by means of direct private connections referred to as private peering.

Peering agreements between ISPs are necessary in order for them to exchange traffic. Without peering agreements, each ISP would have to buy Internet access from every other ISP in order for its customer’s traffic, such as email, to reach and be received from customer’s of other ISPs. We are considered a Tier 1 ISP and, as a result, have settlement-free peering arrangements with most other providers. This allows us to exchange traffic with those ISPs without payment by either party. In such arrangements, each party exchanging traffic bears its own cost of delivering traffic to the point at which it is handed off to the other party. We also engage in public peering arrangements in which each party also pays a fee to the owner of routing equipment that operates as the central exchange for all the participants. We do not treat our settlement-free peering arrangements as generating revenue or expense related to the traffic exchanged. Where we do not have a public or private settlement-free peering connection with an ISP, we exchange traffic through an intermediary, whereby such intermediary receives payment from us. Less than 2% of our traffic is handled this way.

Network Management and Control

Our primary network operations centers are located in Washington, D.C. and Frankfurt. These facilities provide continuous operational support in both North America and Europe. Our network operations centers are designed to immediately respond to any problems in our network. To ensure the quick replacement of faulty equipment in the intra-city and long-haul networks, we have deployed field engineers across North America and Europe. In addition, we have maintenance contracts with third party vendors that specialize in optical and routed networks.

Sales and Marketing

We employ a relationship-based sales and marketing approach. We believe this approach and our commitment to customer service increases the effectiveness of our sales efforts. We market our services through four primary sales channels as summarized below:

Direct Sales.   As of March 15, 2005, our direct sales force included 66 full-time employees focused solely on acquiring and retaining on-net customers. Each member of our direct sales force is assigned a specific market or territory, based on customer type and geographic location. Of these direct sales force employees, 54 have individual quota responsibility. Direct sales personnel are compensated with a base salary plus quota-based commissions and incentives. Each net-centric sales professional is assigned all of the on-net carrier-neutral facilities in a major metropolitan area. We use a customer relationship management system to efficiently track activity levels and sales productivity in particular geographic areas. Furthermore, our sales personnel work through direct face-to-face contact with potential customers in, or intending to locate in, on-net buildings. Through agreements with building owners, we are able to initiate and maintain personal contact with our customers by staging various promotional and social events in our on-net buildings.

Telesales.   As of March 15, 2005, we employed 15 full-time outbound telemarketing sales personnel in Herndon, Virginia. Of these telesales employees, 12 have individual quota responsibility and two are assigned to customer retention. Telesales personnel are compensated with a base salary plus quota-based commissions and incentives.

6

Agent Program.   In the fall of 2004, we launched an agent program as an alternate channel to distribute our products and services. The agent program consists of value-added resellers, IT consultants, and smaller telecom agents, who are managed by our direct sales personnel, and larger national or regional companies whose primary business is to sell telecommunications, data, and Internet services. The agent program includes over 60 agents and started generating revenues for us towards the end of 2004.

Marketing.   As a result of our direct sales approach, we have generally not spent funds on television, radio or print advertising. Our marketing efforts are designed to drive awareness of our products and services, identify qualified leads through various direct marketing campaigns and provide our sales force with product brochures, collateral materials and relevant sales tools to improve the overall effectiveness of our sales organization. In addition, we conduct public relations efforts focused on cultivating industry analyst and media relationships with the goal of securing media coverage and public recognition of our Internet communications services. Our marketing organization also is responsible for our product strategy and direction based upon primary and secondary market research and the advancement of new technologies.

Our Competitors

We face competition from incumbent carriers, Internet service providers and facilities-based network operators, many of whom are much bigger than us, have significantly greater financial resources, better-established brand names and large, existing installed customer bases in the markets in which we compete. We also face competition from other new entrants to the communications services market. Many of these companies offer products and services that are similar to our products and services, and we expect the level of competition to intensify in the future. Unlike some of our competitors, we do not have title to most of the dark fiber that makes up our network. Our interests in that dark fiber are in the form of long-term leases or IRUs obtained from their title holders. We are reliant on the maintenance of such dark fiber to provide our on-net services to customers. We are also dependent on third-party providers, some of whom are our competitors, for the provision of T1 or E1 lines to our off-net customers.

We believe that competition is based on many factors, including price, transmission speed, ease of access and use, breadth of service availability, reliability of service, customer support and brand recognition. Because our fiber optic networks have been recently installed compared to those of the incumbent carriers, our state-of-the-art technology may provide us with cost, capacity, and service quality advantages over some existing incumbent carrier networks; however, our network may not support some of the services supported by these legacy networks, such as circuit-switched voice and frame relay. While the Internet access speeds offered by traditional ISPs typically do not match our on-net offerings, these slower services usually are priced lower than our offerings and thus provide competitive pressure on pricing, particularly for more price-sensitive customers. Additionally, some of our competitors have recently emerged from bankruptcy. Because the bankruptcy process allows for the discharge of debts and rejection of certain obligations, we may have less of an advantage with respect to these competitors. These and other downward pricing pressures have diminished, and may further diminish, the competitive advantages that we have enjoyed as the result of our service pricing.

Regulation

In the United States, the Federal Communications Commission (FCC) regulates common carriers’ interstate services and state public utilities commissions exercise jurisdiction over intrastate basic telecommunications services. Our Internet service offerings are not currently regulated by the FCC or any state public utility commission. However, as we expand our offerings we may become subject to regulation in the U.S. at the federal and state levels and in other countries. The offerings of many of our competitors and vendors, especially incumbent local telephone companies, are subject to direct federal and state regulations. These regulations change from time to time in ways that are difficult for us to predict.

7

There is no current legal requirement that owners or managers of commercial office buildings give access to competitive providers of telecommunications services, although the FCC does prohibit carriers from entering contracts that restrict the right of commercial multiunit property owners to permit any other common carrier to access and serve the property’s commercial tenants.

Our subsidiary, Cogent Canada, offers voice and Internet services in Canada. Generally, the regulation of Internet access services and competitive voice services has been similar in Canada to that in the U.S. in that providers of such services face fewer regulatory requirements than the incumbent local telephone company. This may change. Also, the Canadian government has requirements limiting foreign ownership of certain telecommunications facilities in Canada. We are not subject to these restrictions today. We will have to comply with these to the extent these regulations change and to the extent we begin using facilities in a manner that subjects us to these restrictions.

Our newly acquired European subsidiaries operate in a more highly regulated environment for the types of services they provide. In many Western European countries, a national license is required for the provision of data and Internet services. In addition, our subsidiaries operating in member countries of the European Union are subject to the directives and jurisdiction of the European Union. We believe that each of our subsidiaries has the necessary licenses to provide its services in the markets where it operates today. To the extent we expand our operations or service offerings in Europe or other new markets, we may face new regulatory requirements.

The laws related to Internet telecommunications are unsettled and there may be new legislation and court decisions that may affect our services and expose us to liability.

Employees

As of December 31, 2004, we had 297 employees. Twenty three of our employees in France are represented by a works counsel and a union. We believe at this time that we have satisfactory relations with our employees.

Available Information

We make available free of charge through our Internet website our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. The reports are made available through a link to the SEC’s Internet web site at www.sec.gov. You can find these reports and request a copy of our Code of Ethics on our website at www.cogentco.com under the “Investor Relations” link.

Risk Factors

If our operations do not produce positive cash flow to pay for our growth or meet our operating and financing obligations, and we are unable to otherwise raise additional capital to meet these needs, our ability to implement our business plan will be materially and adversely affected.

Until we can generate positive cash flow from our operations, we will continue to rely on our cash reserves and, potentially, additional equity and debt financings to meet our cash needs. Our future capital requirements likely will increase if we acquire or invest in additional businesses, assets, services or technologies. We may also face unforeseen capital requirements for new technology required to remain competitive, for unforeseen maintenance of our network and facilities, and for other unanticipated expenses associated with running our business. We cannot assure you that we will have access to necessary capital, nor can we assure you that any such financing will be available on terms that are acceptable to us or our stockholders. If additional funds are raised by issuing equity securities, substantial dilution to existing

8

stockholders may result. If we do not add customers, we may be required to raise additional funds through the issuance of debt or equity.

We need to retain existing customers and continue to add new customers in order to become profitable and cash-flow positive.

In order to become profitable and cash flow positive, we need to both retain existing customers and continue to add a large number of new customers. The precise number of additional customers required to become profitable and cash flow positive is dependent on a number of factors, including the turnover of existing customers and the revenue mix among customers. We may not succeed in adding customers if our sales and marketing plan is unsuccessful. In addition, many of our target customers are existing businesses that are already purchasing Internet access services from one or more providers, often under a contractual commitment, and it has been our experience that such target customers are often reluctant to switch providers due to costs associated with switching providers.

We have historically incurred operating losses and these losses may continue for the foreseeable future.

Since we initiated operations in 2000, we have generated increasing operating losses and these losses may continue for the foreseeable future. In 2002, we had an operating loss of $62.3 million, in 2003 we had an operating loss of $81.2 million, and in 2004 we had an operating loss of $84.1 million. As of December 31, 2004, we had an accumulated deficit of $143.7 million. Continued losses may prevent us from pursuing our strategies for growth or may require us to seek unplanned additional capital and could cause us to be unable to meet our debt service obligations, capital expenditure requirements or working capital needs.

We are experiencing rapid growth of our business and operations and we may not be able to efficiently manage our growth.

We have rapidly grown our company through acquisitions of companies, assets and customers as well as implementation of our own network expansion and sales efforts. Our expansion places significant strains on our management, operational and financial infrastructure. Our ability to manage our growth will be particularly dependent upon our ability to:

·develop and retain an effective sales force and qualified personnel;

·maintain the quality of our operations and our service offerings;

·enhance our system of internal controls to ensure timely and accurate compliance with our regulatory reporting requirements; and

·expand our accounting and operational information systems in order to support our growth.

We may have to make significant capital expenditures to address these issues, which could negatively impact our financial position. If we fail to implement these measures, our ability to manage our growth will be impaired.

We may experience difficulties in implementing our business plan in Europe and may incur related unexpected costs.

During the first quarter of 2004, we completed our acquisitions of Firstmark, the parent holding company of LambdaNet Communications France SAS, or LambdaNet France, and LambdaNet Communications Espana SA, or LambdaNet Spain, and have obtained the rights to certain dark fiber and other network assets that were once part of Carrier 1 International S.A. in Germany. Prior to these

9

transactions, we had only minimal European operations. If we are not successful in developing our market presence in Europe, our operating results could be adversely affected.

LambdaNet France and LambdaNet Spain operated a combined telecommunications network and shared operations systems with a formerly affiliated entity, LambdaNet Germany. We did not acquire LambdaNet Germany and we are currently settling claims for intercompany receivables due to and from LambdaNet France and LambdaNet Spain. If we are unable to settle such claims or we experience unforeseen obligations in connection with the separation, we could be subject to additional expenses.

We may experience delays and additional costs in expanding our on-net buildings in Europe.

With part of the proceeds from the Public Offering, if consummated, we plan to add approximately 100 carrier-neutral facilities and other on-net buildings to our network in Europe. We may be unsuccessful at identifying appropriate buildings or negotiating favorable terms for acquiring access to such buildings, and consequently, may experience difficulty in adding customers to our European network and fully using the network’s capacity.

We may not successfully make or integrate acquisitions or enter into strategic alliances.

As part of our growth strategy, we intend to pursue selected acquisitions and strategic alliances. We have already completed 13 acquisitions, including ten in the last two years. We compete with other companies for acquisition opportunities and we cannot assure you that we will be able to effect future acquisitions or strategic alliances on commercially reasonable terms or at all. Even if we enter into these transactions, we may experience:

·delays in realizing the benefits we anticipate or we may not realize the benefits we anticipate;

·difficulties or higher-than-anticipated costs associated with integrating any acquired companies, products or services into our existing business;

·attrition of key personnel from acquired businesses;

·unexpected costs or charges; or

·unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our existing operations.

In the past, our acquisitions have often included assets, service offerings and financial obligations that are not compatible with our core business strategy. We have expended management attention and other resources to the divestiture of assets, modification of products and systems as well as restructuring financial obligations of acquired operations. In most acquisitions, we have been successful in renegotiating long-term agreements that we have acquired relating to long distance and local transport of data and IP traffic. If we are unable to satisfactorily renegotiate such agreements in the future or with respect to future acquisitions, we may be exposed to large claims for payment for services and facilities we do not need.

10

Consummating these transactions could also result in the incurrence of additional debt and related interest expense, as well as unforeseen contingent liabilities, all of which could have a material adverse effect on our business, financial condition and results of operations. Because we have purchased financially distressed companies or their assets, and may continue to do so in the future, we have not had, and may not have, the opportunity to perform extensive due diligence or obtain contractual protections and indemnifications that are customarily provided in corporate acquisitions. As a result, we may face unexpected contingent liabilities arising from these acquisitions. We may also issue additional equity in connection with these transactions, which would dilute our existing shareholders.

Revenues generated by the customer contracts that we have acquired have accounted for a substantial portion of our historical growth in net service revenue. We have historically experienced a decline in revenue attributable to acquired customers as these customers’ contracts have expired and they have entered into standard Cogent customer contracts at generally lower rates or have chosen not to renew service with us. We anticipate that we will experience similar declines with respect to customers we have acquired or will acquire.

We depend upon our key employees and may be unable to attract or retain sufficient qualified personnel.

Our future performance depends upon the continued contribution of our executive management team and other key employees, in particular, our Chairman and Chief Executive Officer, Dave Schaeffer. As founder of our company, Mr. Schaeffer’s knowledge of our business combined with his engineering background and industry experience make him particularly well-suited to lead our company.

Our European operations expose us to economic, regulatory and other risks.

The nature of our European business involves a number of risks, including:

·fluctuations in currency exchange rates;

·exposure to additional regulatory requirements, including import restrictions and controls, exchange controls, tariffs and other trade barriers;

·difficulties in staffing and managing our foreign operations;

·changes in political and economic conditions; and

·exposure to additional and potentially adverse tax regimes.

As we continue to expand our European business, our success will depend, in part, on our ability to anticipate and effectively manage these and other risks. Our failure to manage these risks and grow our European operations may have a material adverse effect on our business and results of operations.

Fluctuations in foreign exchange rates may adversely affect our financial position and results of operations.

Our European operations expose us to currency fluctuations and exchange rate risk. For example, while we record revenues and financial results from our European operations in euros, these results are reflected in our consolidated financial statements in U.S. dollars. Therefore, our reported results are exposed to fluctuations in the exchange rates between the U.S. dollar and the euro. In particular, we fund the euro-based operating expenses and associated cash flow requirements of our European operations, including IRU obligations, in U.S. dollars. Accordingly, in the event that the euro strengthens versus the dollar to a greater extent than we anticipate, the expenses and cash flow requirements associated with our European operations may be significantly higher in U.S.-dollar terms than planned.

11

Our business could suffer delays and problems due to the actions of network providers on whom we are partially dependent.

Our off-net customers are connected to our network by means of communications lines that are provided as services by local telephone companies and others. We may experience problems with the installation, maintenance and pricing of these lines and other communications links, which could adversely affect our results of operations and our plans to add additional customers to our network using such services. We have historically experienced installation and maintenance delays when the network provider is devoting resources to other services, such as traditional telephony. We have also experienced pricing problems when a lack of alternatives allows a provider to charge high prices for services in an area. We attempt to reduce this problem by using many different providers so that we have alternatives for linking a customer to our network. Competition among the providers tends to improve installation, maintenance and pricing.

If the information systems that we depend on to support our customers, network operations, sales and billing do not perform as expected, our operations and our financial results may be adversely affected.

We rely on complex information systems to operate our network and support our other business functions. Our ability to track sales leads, close sales opportunities, provision services and bill our customers for those services depends upon the effective integration of our various information systems. If our systems, individually or collectively, fail or do not perform as expected, our ability to process and provision orders, to make timely payments to vendors and to ensure that we collect revenue owed to us would be adversely affected. Migration of acquired operations onto our information systems is an ongoing process that we have been able to manage with minimal negative impact on our operations or customers. However, due to the greater variance between non-U.S. information systems and our primary systems, the integration of our new European operations could increase the likelihood that these systems do not perform as desired. Such failures or delays could result in increased capital expenditures, customer and vendor dissatisfaction, loss of business or the inability to add new customers or additional services, all of which would adversely affect our business and results of operations.

Our business could suffer from an interruption of service from our fiber providers.

Our inter-city and intra-city dark fiber is maintained by the carriers from whom it has been obtained. While we have not experienced material problems with interruption of service in the past, if these carriers fail to maintain the fiber or disrupt our fiber connections for other reasons, such as business disputes with us or governmental takings, our ability to provide service in the affected markets or parts of markets would be impaired. We may incur significant delays and costs in restoring service to our customers, and we may lose customers if delays are substantial.

Our business depends on license agreements with building owners and managers, which we could fail to obtain or maintain.

Our business depends upon our in-building networks. Our in-building networks depend on access agreements with building owners or managers allowing us to install our in-building networks and provide our services in the buildings. These agreements typically have terms of five to ten years. Any deterioration in our existing relationships with building owners or managers could harm our marketing efforts and could substantially reduce our potential customer base. We expect to enter into additional access agreements as part of our growth plan. Current federal and state regulations do not require building owners to make space available to us or to do so on terms that are reasonable or nondiscriminatory. While the FCC has adopted regulations that prohibit common carriers under its jurisdiction from entering into exclusive arrangements with owners of multi-tenant commercial office buildings, these regulations do not require building owners to offer us access to their buildings. Building owners or managers may decide not to

12

permit us to install our networks in their buildings or may elect not to renew or amend our access agreements. The initial term of most of our access agreements will conclude in the next several years. Most of these agreements have one or more automatic renewal periods and others may be renewed at the option of the landlord. While no single building access agreement is material to our success, the failure to obtain or maintain certain of these agreements would reduce our revenue, and we might not recover our costs of procuring building access and installing our in-building networks.

We may not be able to obtain or construct additional building laterals to connect new buildings to our network.

In order to connect a new building to our network we need to obtain or construct a lateral from our metropolitan network to the building. We may not be able to obtain fiber in an existing lateral at an attractive price from a provider and may not be able to construct our own lateral due to the cost of construction or municipal regulatory restrictions. Failure to obtain fiber in an existing lateral or to construct a new lateral could keep us from adding new buildings to our network and from increasing our revenues.

Impairment of our intellectual property rights and our alleged infringement on other companies’ intellectual property rights could harm our business.

We are aware of several other companies in our and other industries that use the word “Cogent” in their corporate names. One company has informed us that it believes our use of the name “Cogent” infringes on their intellectual property rights in that name. If such a challenge is successful, we could be required to change our name and lose the goodwill associated with the Cogent name in our markets.

The sector in which we operate is highly competitive, and we may not be able to compete effectively.

We face significant competition from incumbent carriers, Internet service providers and facilities-based network operators. Relative to us, many of these providers have significantly greater financial resources, more well-established brand names, larger customer bases, and more diverse strategic plans and service offerings.

Intense competition from these traditional and new communications companies has led to declining prices and margins for many communications services, and we expect this trend to continue as competition intensifies in the future. Decreasing prices for high-speed Internet services have somewhat diminished the competitive advantage that we have enjoyed as a result of our service pricing.

Our quarterly operating results are subject to substantial fluctuations and you should not rely on them as an indication of our future results.

In the past our quarterly operating results have fluctuated dramatically based largely on one-time events, such as acquisitions, gains from debt restructurings, other initiatives and the erosion of non-core revenues. Some of these fluctuations were predictable, but some were unforeseen. The factors that have caused, and that may in the future cause, such quarterly variances are numerous and may work in combination to cause such variances. These factors include:

·demand for our services;

·the impact of acquisitions, including the ability to achieve planned cost reductions;

·our ability to meet the demand for our services;

·changes in pricing policies by us and our competitors;

·increased competition;

13

·network outages or failures;

·delays, reductions or interruptions from suppliers; and

·changes in the North American or European economy.

Many of these factors are beyond our control. Accordingly, our quarterly operating results may vary significantly in the future and period-to-period comparisons of our results of operations may not be meaningful and should not be relied upon as indicators of our full year performance or future performance. Our share price may be subject to greater volatility due to these fluctuations in our operating results.

Our connections to the Internet require us to establish and maintain relationships with other providers, which we may not be able to maintain.

The Internet is composed of various public and private network providers who operate their own networks and interconnect them at public and private interconnection points. Our network is one such network. In order to obtain Internet connectivity for our network, we must establish and maintain relationships with other providers and incur the necessary capital costs to locate our equipment and connect our network at these various interconnection points.

By entering into what are known as settlement-free peering arrangements, providers agree to exchange traffic between their respective networks without charging each other. Our ability to avoid the higher costs of acquiring dedicated network capacity and to maintain high network performance is dependent upon our ability to establish and maintain peering relationships. We cannot assure you that we will be able to continue to establish and maintain those relationships. The terms and conditions of our peering relationships may also be subject to adverse changes, which we may not be able to control. If we are not able to maintain or increase our peering relationships in all of our markets on favorable terms, we may not be able to provide our customers with high performance or affordable services, which could have a material adverse effect on our business. We have in the past encountered some disputes with certain of our providers regarding our peering arrangements, but we have consistently been able to route our traffic through alternative peering arrangements, resolve such disputes or terminate such peering arrangements, none of which have had the effect of adversely impacting our business.

We make some of these connections pursuant to agreements that make data transmission capacity available to us at negotiated rates. In some instances these agreements have minimum and maximum volume commitments. If we fail to meet the minimum, or exceed the maximum, volume commitments, our rates and costs may rise.

Network failure or delays and errors in transmissions expose us to potential liability.

Our network uses a collection of communications equipment, software, operating protocols and proprietary applications for the high-speed transportation of large quantities of data among multiple locations. Given the complexity of our network, it is possible that data will be lost or distorted. Delays in data delivery may cause significant losses to one or more customers using our network. Our network may also contain undetected design faults and software bugs that, despite our testing, may not be discovered in time to prevent harm to our network or to the data transmitted over it. The failure of any equipment or facility on the network could result in the interruption of customer service until we effect necessary repairs or install replacement equipment. Network failures, delays and errors could also result from natural disasters, power losses, security breaches, computer viruses, denial of service attacks and other natural or man-made events. Our off-net services are dependent on the network of other providers or on local telephone companies. Network failures, faults or errors could cause delays or service interruptions, expose

14

us to customer liability or require expensive modifications that could have a material adverse effect on our business.

As an Internet access provider, we may incur liability for information disseminated through our network.

The law relating to the liability of Internet access providers and on-line services companies for information carried on or disseminated through their networks is unsettled. As the law in this area develops and as we expand our international operations, the potential imposition of liability upon us for information carried on and disseminated through our network could require us to implement measures to reduce our exposure to such liability, which may require the expenditure of substantial resources or the discontinuation of certain products or service offerings. Any costs that are incurred as a result of such measures or the imposition of liability could harm our business.

Legislation and government regulation could adversely affect us.

As an enhanced service provider, we are not subject to substantial regulation by the FCC or the state public utilities commissions in the United States. Internet service is also subject to minimal regulation in Europe and in Canada. If we decide to offer traditional voice services or otherwise expand our service offerings to include services that would cause us to be deemed a common carrier, we will become subject to additional regulation. Additionally, if we offer voice service using IP (voice over IP) or offer certain other types of data services using IP we may become subject to additional regulation. This regulation could impact our business because of the costs and time required to obtain necessary authorizations, the additional taxes than we may become subject to or may have to collect from our customers, and the additional administrative costs of providing voice services, and other costs. All of these could inhibit our ability to remain a low cost carrier.

Much of the law related to the liability of Internet service providers remains unsettled. For example, many jurisdictions have adopted laws related to unsolicited commercial email or “spam” in the last several years. Other legal issues, such as the sharing of copyrighted information, transborder data flow, universal service, and liability for software viruses could become subjects of additional legislation and legal development. We cannot predict the impact of these changes on us. Regulatory changes could have a material adverse effect on our business, financial condition or results of operations.

Recent terrorist activity throughout the world and military action to counter terrorism could adversely impact our business.

The September 11, 2001 terrorist attacks in the United States and the continued threat of terrorist activity and other acts of war or hostility have had, and may continue to have, an adverse effect on business, financial and general economic conditions internationally. Effects from these events and any future terrorist activity, including cyber terrorism, may, in turn, increase our costs due to the need to provide enhanced security, which would adversely affect our business and results of operations. These circumstances may also damage or destroy the Internet infrastructure and may adversely affect our ability to attract and retain customers, our ability to raise capital and the operation and maintenance of our network access points. We are particularly vulnerable to acts of terrorism because our largest customer concentration is located in New York and we are headquartered in Washington, D.C., cities that have historically been primary targets for such terrorist attacks.

ITEM 2.DESCRIPTION OF PROPERTIES

We own no material real property in North America. We lease our headquarters facilities consisting of approximately 15,370 square feet in Washington, D.C. We also lease approximately 262,000 square feet of space in 42 locations in office buildings and data centers to house our colocation facilities, regional

15

offices and operations centers. The lease for our headquarters is with an entity controlled by our Chief Executive Officer. The lease is year-to-year on market terms, and we anticipate that we will be able to renew this lease on substantially the same terms upon its expiration on August 31, 2006. The terms of our other leases generally are for ten years with two five-year renewal options. We believe that these facilities are generally in good condition and suitable for our operations. In addition to the above leases, we also have, from our acquisitions, leases for approximately 84,000 square feet of office space in 10 locations. Eight of these locations are currently sublet to third parties. Two are currently being marketed for sublease.

Through the acquisition of our French and Spanish subsidiaries in January, 2004, we acquired three properties in France. All three properties are data centers and points-of-presence, or POP, facilities ranging in size from 11,838 to 18,292 square feet. We believe that the current market value of these properties is 5.1 million euros or approximately $6.6 million. On March 30, 2005, we sold one of the three properties, located in Lyon, France, for net proceeds of approximately $5.1 million. Through our European subsidiaries, we also lease approximately 204,000 square feet of space in office buildings and data centers to house our colocation facilities, regional offices and operations centers. Approximately 174,000 square feet of the total are used for active POP locations, which house our network equipment and provide colocation space for our customers and have an average size of 9,000 square feet. The terms of these leases generally are for nine years with an opportunity to terminate the lease every three years. Much of the general office space and non-active POP locations are currently on the market to be sublet to third parties. We believe that these facilities are generally in good condition and suitable for our operations.

ITEM 3.LEGAL PROCEEDINGS

We are involved in legal proceedings in the normal course of our business that we do not expect to have a material adverse affect on our business, financial condition or results of operations.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

On October 26, 2004, the holders of our securities, on an as-if-converted-to-common basis, holding in the aggregate approximately 72% of our common stock, approved by written consent the issuance of 3,700 shares our Series M participating convertible preferred stock and the amendment to our Fourth Amended and Restated Certificate of Incorporation in order to exempt the issuance of Series M preferred stock from certain antidilution rights held by the other holders of preferred stock. The shares of Series M preferred stock converted into approximately 5.7 million shares of our common stock in the Equity Conversion.

16

PART II

ITEM 5.MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our sole class of common equity is our common stock, par value $0.001, which is currently traded on the American Stock Exchange under the symbol “COI.” Prior to February 5, 2002 no established public trading market for the common stock existed.

As of March 25, 2005, there were approximately 471 holders of record of shares of our common stock holding approximately 32,398,460 shares of our common stock.

The table below shows, for the quarters indicated, the reported high and low trading prices of our common stock on the American Stock Exchange, which are not split-adjusted.

	High			Low
Calendar Year 2003
First Quarter		$	0.94		$	0.40
Second Quarter		3.23			0.32
Third Quarter		2.39			0.80
Fourth Quarter		1.98			0.95
Calendar Year 2004
First Quarter		$	2.74		$	1.10
Second Quarter		2.19			0.27
Third Quarter		0.40			0.23
Fourth Quarter		2.00			0.28
Calendar Year 2005
First Quarter (As of March 25, 2005)(1)		$	25.40		$	9.65

(1)The high and low trading prices for the first quarter of 2005 give effect to our Reverse Stock Split.

We have not paid any dividends on our common stock since our inception and do not anticipate paying any dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will be dependent upon then-existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors deems relevant.

17

ITEM 6.SELECTED CONSOLIDATED FINANCIAL DATA

The annual financial information set forth below has been derived from the audited consolidated financial statements included in this Report. The information should be read in connection with, and is qualified in its entirety by reference to, the financial statements and notes included elsewhere in this Report.

	Years Ended December, 31
	2000			2001			2002			2003			2004
	(dollars in thousands)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net service revenue	$	—		$	3,018		$	51,913		$	59,422		$	91,286
Operating expenses:
Cost of network operations	3,040			19,990			49,091			47,017			63,466
Amortization of deferred compensation—cost of network operations	—			307			233			1,307			858
Selling, general, and administrative	10,845			27,322			33,495			26,570			40,382
Amortization of deferred compensation—SG&A	—			2,958			3,098			17,368			11,404
Gain on settlement of vendor litigation	—			—			(5,721		)	—			—
Terminated public offering costs	—			—			—			—			779
Restructuring charge	—			—			—			—			1,821
Depreciation and amortization	338			13,535			33,990			48,387			56,645
Total operating expenses	14,223			64,112			114,186			140,649			175,355
Operating loss	(14,223		)	(61,094		)	(62,273		)	(81,227		)	(84,069		)
Settlement of note holder litigation	—			—			(3,468		)	—			—
Interest income (expense) and other, net	2,462			(5,819		)	(34,545		)	(18,264		)	(10,883		)
Gains—lease debt restructurings	—			—			—			—			5,292
Gain—Allied Riser note settlement	—			—			—			24,802			—
Gain—Cisco credit facility—troubled debt restructuring	—			—			—			215,432			—
(Loss) income before extraordinary gain	(11,761		)	(66,913		)	(100,286		)	140,743			(89,660		)
Extraordinary gain—Allied Riser merger	—			—			8,443			—			—
Net (loss) income	(11,761		)	(66,913		)	(91,843		)	140,743			(89,660		)
Beneficial conversion of preferred stock	—			(24,168		)	—			(52,000		)	(43,986		)
Net (loss) income applicable to common stock	$	(11,761	)	$	(91,081	)	$	(91,843	)	$	88,743		$(133,646		)
Net (loss) income applicable to common stock—basic	$	(170.16	)	$	(1,295.60	)	$	(564.45	)	$	11.18		$	(175.03	)
Net (loss) income applicable common stock—diluted	$	(170.16	)	$	(1,295.60	)	$	(564.45	)	$	11.18		$	(175.03	)
Weighted-average common shares—basic	69,118			70,300			162,712			7,935,831			763,540
Weighted-average common shares—diluted	69,118			70,300			162,712			7,938,898			763,540
CONSOLIDATED BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents	$	65,593		$	49,017		$	39,314		$	7,875		$	13,844
Total assets	187,740			319,769			407,677			344,440			378,586
Long-term debt (including current portion) (net of unamortized discount of $78,140 in 2002, $6,084 in 2003 and $5,026 in 2004)	77,936			202,740			347,930			83,702			126,382
Preferred stock	115,901			177,246			175,246			97,681			139,825
Stockholders’ equity	104,248			110,214			32,626			244,754			212,490
OTHER OPERATING DATA:
Net cash used in operating activities	(16,370		)	(46,786		)	(41,567		)	(27,357		)	(26,425		)
Net cash used in  investing activities	(80,989		)	(131,652		)	(19,786		)	(25,316		)	(2,701		)
Net cash provided by financing activities	162,952			161,862			51,694			20,562			34,486

All share and per-share data in the table above reflects the 1-for-10 reverse stock split that occurred in connection with our merger with Allied Riser in February 2002 and the 1-for-20 Reverse Stock Split that occurred in March 2005. In February 2005, all of our preferred stock was converted into common stock in the Equity Conversion.

18

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with “Selected Consolidated Financial and Other Data” and our consolidated financial statements and related notes included in this report. The discussion in this report contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this report should be read as applying to all related forward-looking statements wherever they appear in this report. Our actual results could differ materially from those discussed here. Factors that could cause or contribute to these differences include those discussed in “Risk Factors,” as well as those discussed elsewhere. You should read “Risk Factors” and “Cautionary Notice Regarding Forward-Looking Statements.”

General Overview

We are a leading facilities-based provider of low-cost, high-speed Internet access and IP communications services. Our network is specifically designed and optimized to transmit data using IP. IP networks are significantly less expensive to operate and are able to achieve higher performance levels than the traditional circuit-switched networks used by our competitors, thus giving us clear cost and performance advantages in our industry. We deliver our services to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations through over 8,700 customer connections in North America and Europe. Our primary on-net service is Internet access at a speed of 100 Megabits per second, much faster than typical Internet access currently offered to businesses. We offer this on-net service exclusively through our own facilities, which run all the way to our customers’ premises.

Our network is comprised of in-building riser facilities, metropolitan optical fiber networks, metropolitan traffic aggregation points and inter-city transport facilities. The network is physically connected entirely through our facilities to over 980 buildings in which we provide our on-net services, including over 800 multi-tenant office buildings. We also provide on-net services in carrier-neutral colocation facilities, data centers and single-tenant office buildings. Because of our integrated network architecture, we are not dependent on local telephone companies to serve our on-net customers. In addition to providing our on-net services, we also provide Internet connectivity to customers that are not located in buildings directly connected to our network. We serve these off-net customers using other carriers’ facilities to provide the last mile portion of the link from our customers’ premises to our network. We emphasize the sale of on-net services because sales of these services generate higher gross profit margins.

We believe our key opportunity is provided by our high-capacity network, which provides us with the ability to add a significant number of customers to our network with minimal incremental costs. Our greatest challenge is adding customers to our network in a way that maximizes its use and at the same time provides us with a customer mix that produces strong profit margins. We are responding to this challenge by increasing our sales and marketing efforts. In addition, we may add customers to our network through strategic acquisitions.

We plan to expand our network to locations that can be economically integrated and represent significant concentrations of Internet traffic. We believe that the relative maturities of our North American and European operations will result in the majority of this expansion occurring in Europe. We may identify locations that we desire to serve with our on-net product but cannot be cost effectively added to our network. The key to developing a profitable business will be to carefully match the expense of extending our network to reach new customers with the revenue generated by those customers.

We believe the two most important trends in our industry are the continued growth in Internet traffic and a corresponding decline in Internet access prices. As Internet traffic continues to grow and prices per

19

unit of traffic continue to decline, we believe our ability to load our network and gain market share from less efficient network operators will expand. However, continued erosion in Internet access prices will likely have a negative impact on our results of operations.

We have grown our net service revenue from $3.0 million for the year ended December 31, 2001 to $91.3 million for the year ended December 31, 2004. Net service revenue is determined by subtracting our allowances for sales credit adjustments and unfulfilled purchase obligations from our gross service revenue. We have generated our revenue growth through the strategic acquisitions of communications network assets and customers, primarily from financially distressed companies, the continued expansion of our network of on-net buildings and the increase in customers generated by our sales and marketing efforts.

Our net service revenue is derived from our on-net, off-net and non-core services, which comprised 55.5%, 26.4% and 18.1% of our net service revenue, respectively, for the year ended December 31, 2003 and 63.4%, 25.9% and 10.7% for the year ended December 31, 2004. Our on-net service consists of high-speed Internet access and IP connectivity ranging from 0.5 Megabits per second to several Gigabits per second of bandwidth. We offer our on-net services to customers located in buildings that are physically connected to our network. Off-net services are sold to businesses that are connected to our network primarily by means of T1, T3, E1 and E3 lines obtained from other carriers. Our non-core services, which consist of legacy services of companies whose assets or businesses we have acquired, include email, retail dial-up Internet access, shared web hosting, managed web hosting, managed security, voice services (only provided in Toronto, Canada), point to point private line services, and services provided to LambdaNet Germany under a network sharing arrangement as discussed below. We do not actively market these non-core services and expect the net service revenue associated with them to continue to decline.

We have grown our gross profit from $2.8 million for the year ended December 31, 2002 to $27.8 million for the year ended December 31, 2004. Our gross profit margin has expanded from 5.4% in 2002 to 30.5% for the year ended December 31, 2004. We determine gross profit by subtracting network operation expenses from our net service revenue (other than amortization of deferred compensation). The amortization of deferred compensation classified as cost of network services was $0.2 million, $1.3 million and $0.9 million for the years ended December 31, 2002, 2003 and 2004, respectively. We believe that our gross profit will benefit from the limited incremental expenses associated with providing service to new on-net customers. We have not allocated depreciation and amortization expense to our network operations expense.

Due to our strategic acquisitions of network assets and equipment, we believe we are positioned to grow our revenue base and profitability without significant additional capital investments. We continue to deploy network equipment to other parts of our network to maximize the utilization of our assets without incurring significant additional capital expense. As a result, our future capital expenditures will be based primarily on our planned expansion of on-net buildings and the growth of our customer base. We anticipate that our future capital expenditure rate will be less than our historical capital expenditure rate.

We plan to use part of the proceeds of our Public Offering, if consummated, to increase our number of on-net buildings by approximately 100, primarily by adding carrier-neutral facilities in Europe, over the next 12 months.

Historically, our operating expenses have exceeded our net service revenue resulting in operating losses of $62.3 million, $81.2 million and $84.1 million in 2002, 2003 and 2004, respectively. In each of these periods, our operating expenses consisted primarily of the following:

·Network operations expenses consist primarily of the cost of leased circuits, sites and facilities; telecommunications license agreements, network maintenance expenses, salaries of, and expenses related to, employees who are directly involved with maintenance and operation of our network, who we refer to as network employees.

20

·Selling general and administrative expenses consist primarily of salaries, bonuses and related benefits paid to our non-network employees and related selling and administrative costs.

·Depreciation and amortization expenses result from the depreciation of our property and equipment, including the assets and capitalized expenses associated with our network and the amortization of our intangible assets.

·Amortization of deferred compensation that results from the expense of amortizing the fair value of our stock options and restricted stock granted to our employees.

Recent Developments

Public Offering

On February 14, 2005, we filed a registration statement to sell up to $86.3 million worth of shares of common stock in a public offering. There can be no assurances that the offering will be completed.

Equity Conversion

On February 15, 2005, the holders of our preferred stock converted all of their shares of preferred stock into shares of our common stock in the Equity Conversion. As a result, we no longer have outstanding shares of preferred stock and the liquidation preferences on our preferred stock have been eliminated.

Subordinated Note

On February 24, 2005, we issued a subordinated note in the principal amount of $10.0 million to Columbia Ventures Corporation. The note was issued pursuant to a Note Purchase Agreement dated February 24, 2005. Columbia Ventures Corporation is owned by one of the Company’s directors and shareholders.

Line of Credit

On March 9, 2005, we entered into a line of credit with a commercial bank. The line of credit provides for borrowings of up to $10.0 million and is secured by our accounts receivable. The borrowing base is determined primarily by the aging characteristics related to our accounts receivable. On March 18, 2005, we borrowed $10.0 million against our North American accounts receivable under the line of credit. Of this amount $4.0 million is restricted and held by the lender.

Reverse Stock Split

On March 24, 2005, we effected a 1-for-20 reverse stock split. Accordingly, all share and per share amounts in this report have been retroactively adjusted to give effect to this event.

Building Sale

On March 30, 2005, we sold a building we owned located in Lyon, France for net proceeds of approximately $5.1 million. This transaction resulted in a gain of approximately $3.9 million.

Acquisitions

Since our inception, we have consummated 13 acquisitions through which we have generated revenue growth, expanded our network and customer base and added strategic assets to our business. We have accomplished this primarily by acquiring financially distressed companies or their assets at a significant discount to their original cost. The overall impact of these acquisitions on the operation of our business has

21

been to extend the physical reach of our network in both North America and Europe, expand the breadth of our service offerings, and increase the number of customers to whom we provide our services. The overall impact of these acquisitions on our balance sheet and cash flows has been to significantly increase the assets on our balance sheet, including cash in the case of the Allied Riser merger, increase our indebtedness and increase our cash flows from operations due to our increased customer base. A substantial portion of our historical growth in net service revenue has been generated by the customer contracts we have acquired. We have historically experienced a decline in revenue attributable to acquired customers as these customers’ contracts have expired and they have entered into standard Cogent customer contracts at generally lower rates or have chosen not to renew service with us. We anticipate that we will experience similar declines with respect to customers we have acquired or will acquire.

 Verio Acquisition

In December 2004, we acquired most of the off-net Internet access customers of Verio Inc., a leading global IP provider and subsidiary of NTT Communications Corp. The acquired assets included over 3,700 customer connections located in 23 of our U.S. markets, customer accounts receivable and certain network equipment. We assumed the liabilities associated with providing services to these customers including vendor relationships, accounts payable, and accrued liabilities. We are integrating these acquired assets into our operations and onto our network.

Acquisition of Aleron Broadband Services

In October 2004, we acquired certain assets of Aleron Broadband Services, formally known as AGIS Internet, and $18.5 million in cash, in exchange for 3,700 shares of our Series M preferred stock, which converted into approximately 5.7 million shares of our common stock in the Equity Conversion. We acquired Aleron’s customer base and network, as well as Aleron’s Internet access and managed modem service. We are integrating these acquired assets into our operations and onto our network.

Acquisition of Global Access

In September 2004, we issued 185 shares of our Series L preferred stock in exchange for the majority of the assets of Global Access Telecommunications Inc. The Series L preferred stock issued in the transaction converted into approximately 0.3 million shares of our common stock in the Equity Conversion. Global Access provided Internet access and other data services in Germany. We acquired over 350 customers in Germany as a result of the acquisition and have completed the process of migrating these customers onto our network.

Acquisition of UFO Group, Inc.

In August 2004, we acquired certain assets of Unlimited Fiber Optics, Inc., or UFO, for 2,600 shares of our Series K preferred stock. The preferred stock issued in the merger converted into approximately 0.8 million shares of our common stock in the Equity Conversion. Among these assets is UFO’s customer base, which is comprised of data service customers located in San Francisco and Los Angeles. The acquired assets also included net cash of approximately $1.9 million and customer accounts receivable. We are in the process of integrating these acquired assets into our operations and onto our network and we expect to complete this integration in the second quarter of 2005.

Acquisition of European Network

In 2004 we expanded our operations into Europe through a series of acquisitions in which we acquired customers and extended our network, primarily in France, Spain, and Germany.

22

In September 2003, we began exploring the possibility of acquiring LNG Holdings SA, or LNG, an operator of a European telecommunications network that was on the verge of insolvency. We determined that an acquisition of LNG in whole was not advisable at that time; however, the private equity funds that owned LNG refused to consider a transaction in which we would acquire only parts of the network. In order to prevent LNG from liquidating and to preserve our ability to structure an acceptable acquisition, in November 2003, our Chief Executive Officer formed a corporation that acquired a 90% interest in LNG in return for a commitment to cause at least $2 million to be invested in LNG’s subsidiary LambdaNet France and an indemnification of LNG’s selling stockholders by us and the acquiring corporation. In November 2003, we reached an agreement with investment funds associated with BNP Paribas and certain of our existing investors regarding the acquisition of the LNG networks in France, Spain and Germany.

We completed the first step of the European network acquisition in January 2004. The investors funded a corporation that they controlled with $2.5 million and acquired Firstmark Communications Participation S.à r.l., now named Cogent Europe S.à r.l., the parent holding company of LambdaNet France and LambdaNet Spain, from LNG for one euro, or $1.30. As consideration, the investors, through the corporation they controlled, entered into a commitment to use reasonable efforts to cause LNG to be released from a guarantee of certain obligations of LambdaNet France and a commitment to fund LambdaNet France with $2.0 million. That corporation was then merged into one of our subsidiaries in a transaction in which the investors received 2,575 shares of Series I preferred stock that converted into approximately 0.8 million shares of our common stock in the Equity Conversion.

The planned second step of the transaction was the acquisition of the German network of LNG. We attempted to structure an acceptable acquisition that would have entailed using $19.5 million allocated by the investors to restructure the existing bank debt of LambdaNet Germany; however, we subsequently concluded that it was unlikely that we could structure an acceptable acquisition of LambdaNet Germany and we began to seek an alternative German network acquisition in order to complete the European portion of our network and meet the conditions required to cause the investors to fund $19.5 million.

In March 2004, we identified network assets in Germany formerly operated as part of the Carrier 1 network as an attractive acquisition opportunity. Pursuant to the November commitment, the investors funded a newly-formed Delaware corporation with $19.5 million, and the corporation through a German subsidiary acquired the rights to certain assets of the Carrier 1 network in return for 2.2 million euros, or $2.9 million. That corporation then was merged into one of our subsidiaries in a transaction in which the investors received shares of our Series J preferred stock that converted into approximately 6.0 million shares of our common stock in the Equity Conversion.

Acquisition of Assets of Fiber Network Services

In February 2003, we acquired the principal assets of Fiber Network Services, Inc., or FNSI, an Internet service provider in the midwestern United States, in exchange for options to purchase 6,000 shares of our common stock and the assumption of certain of FNSI’s liabilities.

Acquisition of PSINet Assets

In April 2002, we purchased the principal U.S. assets of PSINet, Inc. out of bankruptcy in exchange for $9.5 million and the assumption of certain liabilities. With the acquisition of PSINet assets we began to offer our off-net service and acquired significant non-core services.

Allied Riser Merger

In February 2002, we acquired Allied Riser Communications Corporation, a facilities-based provider of broadband data, video and voice communications services to small and medium-sized businesses in the United States and Canada in exchange for the issuance of approximately 0.1 million shares of our common

23

stock. As a result of the merger, Allied Riser became a wholly-owned subsidiary. In connection with the merger, we became co-obligor under Allied Riser’s 71¤2% Convertible Subordinated Notes.

Results of Operations

Our management reviews and analyzes several key performance indicators in order to manage our business and assess the quality of and potential variability of our net service revenues and cash flows. These key performance indicators include:

·net service revenues, which are an indicator of our overall business growth;

·gross profit, which is an indicator of both our service offering mix, competitive pressures and the cost of our network operations;

·growth in our on-net customer base, which is an indicator of the success of our on-net focused sales efforts;

·growth in our on-net buildings; and

·distribution of revenue across our service offerings.

Year Ended December 31, 2003 Compared to the Year Ended December 31, 2004

The following summary table presents a comparison of our results of operations for the year ended December 31, 2003 and 2004 with respect to certain key financial measures. The comparisons illustrated in the table are discussed in greater detail below.

	Year Ended December 31,					Percent
	2003		2004			Change
	(in thousands)
Net service revenue	$	59,422	$	91,286		53.6	%
Network operations expenses(1)	47,017		63,466			35.0	%
Gross profit(2)	12,405		27,820			124.3	%
Selling, general, and administrative expenses(3)	26,570		40,382			52.0	%
Restructuring charge	—		1,821			—
Terminated public offering costs	—		779			—
Depreciation and amortization expenses	48,387		56,645			17.1	%
Gain—Cisco troubled debt restructuring	215,432		—			—
Gain—Allied Riser note exchange	24,802		—			—
Gains—lease obligations restructuring	—		5,292			—
Net income (loss)	140,743		(89,660		)	(163.7	)%

(1)Excludes amortization of deferred compensation of $1,307 and $858 in the years ended December 31, 2003 and 2004, respectively, which, if included would have resulted in a period-to-period change of 33.1%.

(2)   Excludes amortization of deferred compensation of $1,307 and $858 in the years ended December 31, 2003 and 2004, respectively, which if included would have resulted in a period-to-period change of 142.9%.

(3)Excludes amortization of deferred compensation of $17,368 and $11,404 in the year ended December 31, 2003 and 2004, respectively, which, if included would have resulted in a period-to-period change of 17.9%.

24

Net Service Revenue.   Our net service revenue increased 53.6% from $59.4 million for the year ended December 31, 2003 to $91.3 million for the year ending December 31, 2004. The $31.9 million increase in net service revenue is attributable to $26.6 million of net service revenue from the customers acquired in the Cogent Europe, UFO, Global Access, Aleron and Verio acquisitions and a $16.0 million increase in organic revenue. We define organic revenue as revenue derived from contracts obtained as a result of our sales efforts. Revenue from acquired customers who enter into contracts with us once their existing contracts expire or amend their acquired contract are reflected as organic revenue. These increases were partially offset by a $10.6 million decrease in revenue from the expiration or termination of customer contracts acquired from Allied Riser, PSINet and FNSI, although many of these customers entered into new contracts with us once their existing contracts expired, and as such, the revenue of these contracts is reflected in the increase in organic revenue. For the year ended December 31, 2003 and 2004, on-net, off-net and non-core services represented 55.5%, 26.4% and 18.1% and 63.4%, 25.9% and 10.7% of our net service revenues, respectively.

Our net service revenue related to our acquisitions is included in our statements of operations from the acquisition dates. Net service revenue from our January 5, 2004 Cogent Europe acquisition totaled approximately $23.3 million for the year ended December 31, 2004. Approximately $2.0 million of the Cogent Europe net service revenue during the period was derived from network sharing services rendered to LambdaNet Communications Deutschland AG, or LambdaNet Germany. LambdaNet Germany was majority-owned by LNG Holdings until April 2004 when it was sold to an unrelated third party. In the first quarter of 2005, this network sharing arrangement was eliminated. Net service revenue from our UFO, Aleron and Verio acquisitions which occurred in August 2004, October 2004 and December 2004, respectively, totaled $5.8 million for the year ended December 31, 2004.

Network Operations Expenses.   Our network operations expenses, excluding the amortization of deferred compensation, increased 35.0% from $47.0 million for the year ended December 31, 2003 to $63.5 million for the year ended December 31, 2004. The increase is primarily attributable to $15.4 million of costs incurred in connection with the operation of our European network after our Cogent Europe and Global Access acquisitions. For the year ended December 31, 2004, Cogent Europe recorded $1.8 million of costs associated with using the LambdaNet Germany network. In the first quarter of 2005, this network sharing arrangement was eliminated. Our total cost of network operations for the years ended December 31, 2003 and December 31, 2004 includes approximately $1.3 million and $0.9 million, respectively, of amortization of deferred compensation expense classified as cost of network operations.

Gross profit. Our gross profit, excluding amortization of deferred compensation, increased 124.3% from $12.4 million for the year ended December 31, 2003 to $27.8 million for the year ended December 31, 2004. The $15.4 million increase is attributed to our increase in net service revenue.

Selling, General, and Administrative Expenses.   Our SG&A expenses, excluding the amortization of deferred compensation, increased 52.0% from $26.6 million for the year ended December 31, 2003 to $40.4 million for the year ended December 31, 2004. SG&A expenses increased primarily from the $13.2 million of SG&A expenses associated with our operations in Europe after our Cogent Europe and Global Access acquisitions. Our total SG&A expenses for the years ended December 31, 2003 and December 31, 2004 include $17.4 million and $11.4 million, respectively, of amortization of deferred compensation.

Amortization of Deferred Compensation.   The total amortization of deferred compensation decreased from $18.7 million for the year ended December 31, 2003 to $12.3 million for the year ending December 31, 2004.

Deferred compensation is related to restricted shares of Series H preferred stock granted to our employees primarily in October 2003 under our 2003 Incentive Award Plan and the amortization of $4.7 million of deferred compensation related to options for shares of Series H preferred stock. These

25

options were granted to certain of our employees in the third quarter of 2004 with an exercise price on an as-converted basis below the trading price of our common stock on the grant date. We amortize deferred compensation costs on a straight-line basis over the service period.

Restructuring charge.   In July 2004, we abandoned an office in Paris obtained in the Cogent Europe acquisition and relocated operations to another Cogent Europe facility. We recorded a total restructuring charge of approximately $1.8 million related to the remaining commitment on the lease less our estimated sublease income.

Withdrawal of Public Offering.   In May 2004, we filed a registration statement to sell shares of common stock in a public offering. In October 2004, we withdrew this registration statement and expensed the associated deferred costs of approximately $0.8 million.

Depreciation and Amortization Expenses.   Our depreciation and amortization expense increased 17.1% from $48.4 million for the year ended December 31, 2003 to $56.6 million for the year ended December 31, 2004. Of this increase, $8.2 million resulted from depreciation and amortization of assets acquired in our Cogent Europe and Global Access acquisitions.

Gain—Credit Facility Restructuring.   The restructuring of our Cisco credit facility on July 31, 2003 resulted in a gain of approximately $215.4 million. The gain resulting from the retirement of the amounts outstanding under the credit facility was determined as follows (in thousands):

Cash paid	$	20,000
Issuance of Series F preferred stock	11,000
Amended and Restated Cisco Note, principal plus future interest	17,842
Transaction costs	1,167
Total Consideration	$	50,009
Amount outstanding under Cisco credit facility	(262,812		)
Interest accrued under the Cisco credit facility	(6,303		)
Book value of cancelled warrants	(8,248		)
Book value of unamortized loan costs	11,922
Total Indebtedness prior to recapitalization	$	(265,441	)
Gain from recapitalization	$	215,432

Gain—Allied Riser Note Exchange.   In connection with the exchange and settlement related to our 71¤2% Convertible Subordinated Notes we recorded a gain of approximately $24.8 million during the year ended December 31, 2003. This gain resulted from the difference between the $36.5 million net book value of the notes ($106.7 million face value less the related unamortized discount of $70.2 million) and $2.0 million of accrued interest, the cash consideration of $5.0 million and the $8.5 million estimated fair market value for the Series D and Series E preferred stock issued to the noteholders less approximately $0.2 million of transaction costs. The estimated fair market value for the Series D and Series E preferred stock was determined by using the price per share of our Series C preferred stock, which represented our most recent equity transaction for cash.

Gain—Lease obligations restructuring.   In 2004, we re-negotiated several lease obligations for our intra-city fiber in France and Spain. These transactions resulted gains of approximately $5.3 million recorded as gains on lease obligation restructurings in the accompanying statement of operations for the year ended December 31, 2004.

26

In March 2004, Cogent France paid approximately $0.3 million and settled amounts due from and due to a vendor. The vendor leased Cogent France its office facility and intra-city IRU and was and continues to be a customer of Cogent France. The settlement agreement also restructured the IRU capital lease by reducing the 2.8 million euros, or $3.7 million, January 2007 lease payment by 1.0 million euros, or $1.3 million, and reducing the 2.5 million euros, or $3.3 million, January 2008 lease payment by 1.0 million euros, or $1.3 million. Under the settlement the lessor also agreed to purchase a minimum annual commitment of IP services from Cogent France. This transaction resulted in a reduction to the capital lease obligation and IRU asset of approximately $1.9 million.

In November 2004, Cogent Spain negotiated modifications to an IRU capital lease and note obligation with a vendor resulting in a 4.4 million euro, or $5.2 million, gain. In exchange for the return of one of two strands of leased optical fiber, Cogent Spain reduced its quarterly IRU lease payments, modified its payments and eliminated accrued and future interest on its note obligation. The note obligation arose in 2003, when Cogent Spain, then LambdaNet España S.A, negotiated a settlement with the vendor that included converting certain amounts due under the capital lease into a note obligation. The 8.3 million euro, or $10.8 million, note obligation had a term of twelve years and bore interest at 5% with a two-year grace period and was repayable in forty equal installments. The first installment was due in 2005. The modified note is interest free and includes nineteen equal quarterly installments of approximately 0.2 million euros, or $0.3 million, and a final payment of 4.1 million euros, or $5.3 million, due in January 2010. Cogent Spain paid 0.2 million euros, or $0.3 million, at settlement. The modification to the note obligation resulted in a gain of approximately $0.2 million.

Net Income (Loss).   Net income was $140.7 million for the year ended December 31, 2003 as compared to a net loss of $(89.7) million for the year ended December 31, 2004. Included in net income for the year ended December 31, 2003 are gains from debt restructurings totaling $240.2 million.

Year Ended December 31, 2002 Compared to the Year Ended December 31, 2003

The following summary table presents a comparison of our results of operations for the years ended December 31, 2002 and 2003 with respect to certain key financial measures. The comparisons illustrated in the table are discussed in greater detail below.

	Year Ended December 31,					Percent
	2002			2003		Change
	(in thousands)
Net service revenue	$	51,913		$	59,422		14.5	%
Network operations expenses(1)	49,091			47,017			(4.2	)%
Gross profit(2)	2,822			12,405			340.0	%
Selling, general, and administrative expenses(3)	33,495			26,570			(20.7	)%
Depreciation and amortization expenses	33,990			48,387			42.4	%
Gain—Cisco troubled debt restructuring	—			215,432			—
Gain—Allied Riser note exchange	—			24,802			—
Net (loss) income	(91,843		)	140,743			253.2	%

(1)Excludes amortization of deferred compensation of $233 and $1,307 in the years ended December 31, 2002 and 2003, respectively, which, if included, would have resulted in a period-to-period change of (2.0)%.

(2)   Excludes amortization of deferred compensation of $233 and $1,307 in the years ended December 31, 2002 and 2003, respectively, which if included, would have resulted in a period-to-period change of 328.7%.

27

(3)Excludes amortization of deferred compensation of $3,098 and $17,368 in the years ended December 31, 2002 and 2003, respectively, which, if included, would have resulted in a period-to-period change of 20.1%.

Net Service Revenue.   Our net service revenue increased 14.5% from $51.9 million for the year ended December 31, 2002 to $59.4 million for the year ended December 31, 2003. This $7.5 million increase was primarily attributable to a $16.5 million, or a 99.5% increase in revenue from customers purchasing our on-net Internet access service offerings, and a $3.7 million increase in off-net revenue attributable to the customers acquired in the FNSI acquisition. FNSI revenue is included in our consolidated net service revenue since the closing of the acquisition on February 28, 2003. The increase was partially offset by a $15.5 million, or 50.9% decline in net service revenue derived from customers acquired in our April 2, 2002 acquisition of certain PSINet customer accounts, although many of these customers re-signed their contracts with us once their existing PSINet contracts expired and as such, the revenue of these contracts is reflected in the increase in net service revenue.

Network Operations Expenses.   Our network operations expenses, excluding the amortization of deferred compensation, decreased 4.2% from $49.1 million for the year ended December 31, 2002 to $47.0 million for the year ended December 31, 2003. This decrease was primarily due to a $2.0 million decrease during the year ended December 31, 2003 in recurring and transitional PSINet circuit fees associated with providing our off-net services compared to the year ended December 31, 2002. This decrease in circuit fees was primarily driven by a reduction in the number of off-net customers that we served during 2003 and the termination of the transitional fees related to the PSINet acquisition.

Gross Profit.   Our gross profit, excluding amortization of deferred compensation, increased 340.0% from $2.8 million for the year ended December 31, 2003 to $12.4 million for the year ended December 31, 2004. The $9.6 million increase is primarily attributed to our $7.5 million increase in net service revenue.

Selling, General, and Administrative Expenses.   Our SG&A expenses, excluding the amortization of deferred compensation, decreased 20.7% from $33.5 million for the year ended December 31, 2002 to $26.6 million for the year ended December 31, 2003. SG&A for the years ended December 31, 2002 and December 31, 2003 included approximately $3.2 million and $3.9 million, respectively, of expenses related to our allowance for uncollectable accounts. The decrease in SG&A expenses was due to a reduction in transitional activities associated with the Allied Riser, PSINet and FNSI acquisitions and a decrease in headcount during 2003 as compared to 2002.

Amortization of Deferred Compensation.   The amortization of deferred compensation increased from $3.3 million for the year ended December 31, 2002 to $18.7 million for the year ending December 31, 2003. The increase is attributed to the amortization of deferred compensation related to restricted shares of Series H preferred stock granted to our employees primarily in October 2003 under our 2003 Incentive Award Plan.

Depreciation and Amortization Expenses.   Our depreciation and amortization expenses increased 42.4% from $34.0 million for the year ended December 31, 2002 to $48.4 million for the year ended December 31, 2003. This increase occurred primarily because we had more capital equipment and IRUs in service in 2003 than in the 2002. The increase was also attributable to an increase in amortization expense in the 2003 period over 2002. Amortization expense increased because we had more intangible assets during 2003 than in 2002.

Settlement of Allied Riser Noteholder Litigation and Gain on Note Exchange.   In connection with the note exchange and settlement with certain Allied Riser note holders we recorded a gain of approximately $24.8 million during the year ended December 31, 2003. The gain resulted from the difference between the $36.5 million net book value of the notes ($106.7 million face value less an unamortized discount of $70.2 million) and $2.0 million of accrued interest and the consideration of approximately $5.0 million in

28

cash and the $8.5 million estimated fair market value for the Series D and Series E preferred stock issued to the noteholders less approximately $0.2 million of transaction costs.

Gain on Cisco Recapitalization.   The restructuring of our previous Cisco credit facility on July 31, 2003 resulted in a gain of approximately $215.4 million. On a basic income and diluted income per share basis the gain was $27.15 and $27.14 for the year ended December 31, 2003, respectively.

Net (Loss) Income.   As a result of the foregoing, we incurred a net loss of $(91.8) million for the year ended December 31, 2002 and net income of $140.7 million for the year ended December 31, 2003.

Liquidity and Capital Resources

In assessing our liquidity, our management reviews and analyzes our current cash on-hand, our accounts receivable, accounts payable, foreign exchange rates, capital expenditure commitments, and our required debt payments and other obligations.

During 2003, 2004 and 2005, we engaged in a series of transactions pursuant to which we significantly reduced our indebtedness and/or improved our liquidity. These included the following:

·On March 30, 2005, Cogent France sold its building located in Lyon, France for net proceeds of approximately $5.1 million.

·On March 9, 2005, we entered into a line of credit with a commercial bank. The line of credit provides for borrowings of up to $10.0 million and is secured by our accounts receivable. On March 18, 2005, we borrowed $10.0 million against our North American accounts receivable under the line of credit. Of this amount $4.0 million is restricted and held by the lender.

·On February 24, 2005, we issued a subordinated note in the principal amount of $10.0 million to Columbia Ventures Corporation in exchange for $10 million in cash.

·During 2004, in connection with our acquisitions of Aleron and UFO Group and the acquisition of our European Network, we acquired cash totaling approximately $42.2 million.

·In March 2004, Cogent France reduced its obligation under its intra-city IRU by approximately $2.6 million.

·In November 2004, Cogent Spain reduced its quarterly IRU lease payments, modified its payments and eliminated accrued and future interest on its note obligation resulting in a gain of approximately $5.2 million.

·In July 2003, we reduced the $269.1 million in principal amount of then-outstanding indebtedness and accrued interest under our Cisco Credit facility in exchange for a cash payment of $20.0 million, the issuance of 11,000 shares of our Series F preferred stock and the issuance of a $17.0 million Amended and Restated Promissory Note.

·In March 2003, we entered an agreement with the holders of approximately $106.7 million in face value of 71¤2% Convertible Subordinated Notes pursuant to which the noteholders agreed to surrender their notes, including accrued and unpaid interest, in exchange for a cash payment of $5.0 million and the issuance of 3.4 million shares each of our Series D and Series E preferred stock and to dismiss with prejudice their litigation against Allied Riser, in exchange for a cash payment of $4.9 million.

29

Cash Flows

The following table sets forth our consolidated cash flows for the years ended December 31, 2002, 2003, and 2004.

	Year Ended December 31,
	2002			2003			2004
	(in thousands)
Net cash used in operating activities	$	(41,567	)	$	(27,357	)	$	(26,425	)
Net cash used in by investing activities	(19,786		)	(25,316		)	(2,701		)
Net cash provided by financing activities	51,694			20,562			34,486
Effect of exchange rates on cash	(44		)	672			609
Net (decrease) increase in cash and cash equivalents during period	$	(9,703	)	$	(31,439	)	$	5,969

Net Cash Used in Operating Activities.   Net cash used in operating activities was $27.4 million for the year ended December 31, 2003 compared to $26.4 million for 2004. Our primary sources of operating cash are receipts from our customers who are billed on a monthly basis for our services. Our primary uses of operating cash are payments made to our vendors and employees. Our net income was $140.7 million for the year ended December 31, 2003 compared to a net loss of $89.7 million for the year ended December 31, 2004. Net income for the year ended December 31, 2003 included a non-cash gain of $24.8 million related to our settlement with certain Allied Riser note holders and a non-cash gain of $215.4 million related to the restructuring of our Cisco credit facility. Net income for the year ended December 31, 2004 included a non-cash gain of $5.3 million related to our restructuring of certain lease obligations. Depreciation and amortization, including the amortization of deferred compensation and the debt discount on the Allied Riser notes was $70.2 million for the year ended December 31, 2003, and $70.0 million for the year ended December 31, 2004. Net changes in current in assets and liabilities resulted in an increase to operating cash of $1.9 million for the year ended December 31, 2003 and a decrease in operating cash of $0.6 million for the year ended December 31, 2004. Payments for accounts payable and accrued liabilities approximated collections of accounts receivable for the year ended December 31, 2003 and payments for accounts payable and accrued liabilities exceeded collections of accounts receivable by $4.4 million for the year ended December 31, 2004.

Net cash used in operating activities was $41.6 million for the year ended December 31, 2002 compared to $27.4 million for the year ended December 31, 2003. Net loss was $91.8 million for the year ended December 31, 2002. Net income was $140.7 million for the year ended December 31, 2003. Our net loss for the year ended December 31, 2002 includes an extraordinary gain of $8.4 million related to the Allied Riser merger. Net income for the year ended December 31, 2003 includes a non-cash gain of $215.4 million related to the restructuring of our credit facility with Cisco Capital and a $24.8 million non-cash gain related to the exchange of Allied Riser subordinated convertible notes. Depreciation and amortization including amortization of debt discount and deferred compensation was $45.9 million for the year ended December 31, 2002 and $70.2 million for the year ended December 31, 2003. Net changes in current assets and liabilities resulted in an increase to operating cash of $18.5 million for the year ended December 31, 2002 and an increase to operating cash of $1.9 million for the year ended December 31, 2003. Payments for accounts payable and accrued liabilities exceeded collections of accounts receivable by $16.2 million for the year ended December 31, 2002. Payments for accounts payable and accrued liabilities approximated collections of accounts receivable for the year ended December 31, 2003.

Net Cash Used In By Investing Activities.   Net cash used in investing activities was $19.8 million for the year ended December 31, 2002, $25.3 million for the year ended December 31, 2003 and $2.7 million for the year ended December 31, 2004. Our primary uses of investing cash during 2002 were $75.2 million for the purchase of property and equipment, $9.6 million for the purchase of intangible assets in connection

30

with our PSINet acquisition, $3.6 million in connection with our acquisition of the minority interest in Cogent Canada, Inc. and $1.8 million for purchases of short term investments. Cash expenditures were partially offset during 2002 by the $70.4 million of cash and cash equivalents that we acquired in connection with the Allied Riser merger. Our primary use of investing cash during 2003 was $24.0 million for the purchase of property and equipment in connection with the deployment of our network. Our primary uses of investing cash during 2004 were $2.4 million for the purchase of property and equipment and $1.9 million for the purchase of a network in Germany. Our primary sources of investing cash were $2.3 million of cash acquired from our acquisitions of Cogent Europe and Global Access and $6.8 million from the proceeds of the sale of equipment, short term investments and a warrant.

Net Cash Provided by Financing Activities.   Financing activities provided net cash of $51.7 million for the year ended December 31, 2002, $20.6 million for the year ended December 31, 2003 and $34.5 million for the year ended December 31, 2004. Net cash provided by financing activities during 2002 resulted principally from borrowings under our previous Cisco credit facility of $54.4 million, partially offset by $2.7 million in capital lease repayments. Net cash provided by financing activities during 2003 resulted principally from borrowings under our previous Cisco credit facility of $8.0 million and net proceeds of $40.6 million from the sale of our Series G preferred stock, partially offset by a $5.0 million payment related to the Allied Riser note exchange, a $20.0 million payment to Cisco Capital in connection with the Cisco recapitalization and $3.1 million in capital lease repayments. Net cash from financing activities during 2004 resulted from $42.4 million of acquired cash related to our mergers with Symposium Gamma, Symposium Omega, UFO Group, and Cogent Potomac. Net cash used in financing activities for 2004 include a $1.2 million payment to LNG Holdings and $6.6 million for principal payments under our capital leases.

Cash Position and Indebtedness

Our total indebtedness, net of discount, at December 31, 2002, 2003 and 2004 was $347.9 million, $83.7 million and $126.4 million, respectively. At December 31, 2004, our total cash and cash equivalents were $13.8 million. Our total indebtedness at December 31, 2004 includes $103.4 million of the present value of capital lease obligations for dark fiber primarily under 15-25 year IRUs, of which approximately $7.5 million is considered a current liability.

Subordinated Note

On February 24, 2005, we issued a subordinated note in the principal amount of $10.0 million to Columbia Ventures Corporation in exchange for $10 million in cash. The note was issued pursuant to a Note Purchase Agreement dated February 24, 2005. Columbia Ventures Corporation is owned by one of the Company’s directors and shareholders. The note has an initial interest rate of 10% per annum and the interest rate increases by one percent on August 24, 2005, six months after the note was issued, and by a further one percent at the end of each successive six-month period up to a maximum of 17%. Interest on the note accrues and is payable on the note’s maturity date of February 24, 2009. We may prepay the note in whole or in part at any time. The terms of the note require the payment of all principal and accrued interest upon the occurrence of a liquidity event, which is defined as an equity offering of at least $30 million in net proceeds. Our Public Offering would constitute a liquidity event and would require us to use a portion of the proceeds of the offering to repay the principal and accrued interest on the note. The note is subordinated to the debt evidenced by the Amended and Restated Cisco Note, as well as our accounts receivable line of credit obtained in March 2005. Management believes that the terms of the note are at least as favorable as those we would have been able to obtain from an unaffiliated third party.

31

Line of Credit

On March 9, 2005, we entered into a line of credit with a commercial bank. The line of credit provides for borrowings of up to $10.0 million and is secured by our accounts receivable. The borrowing base is determined primarily by the aging characteristics related to our accounts receivable. On March 18, 2005, we borrowed $10.0 million against our North American accounts receivable under the line of credit. Of this amount $4.0 million is restricted and held by the lender. Borrowings under the line of credit accrue interest at the prime rate plus 1.5% and may, in certain circumstances, be reduced to the prime rate plus 0.5%. Our obligations under the line of credit are secured by a first priority lien in certain of our accounts receivable and are guaranteed by our material domestic subsidiaries. The agreements governing the line of credit contain certain customary representations and warranties, covenants, notice provisions and events of default.

Amended and Restated Cisco Note

In connection with the Cisco recapitalization, we amended our credit agreement with Cisco Capital. The Amended and Restated Credit Agreement became effective at the closing of the recapitalization on July 31, 2003. Our remaining $17.0 million of indebtedness to Cisco is evidenced by a promissory note, which we refer to as the Amended and Restated Cisco Note. The Amended and Restated Cisco Note eliminated the covenants related to our financial performance. Cisco Capital retained its senior security interest in substantially all of our assets, except that we are permitted to subordinate Cisco Capital’s security interest in our accounts receivable.

The Cisco recapitalization was considered a troubled debt restructuring under Statement of Financial Accounting Standards (SFAS) No. 15, Accounting by Debtors and Creditors of Troubled Debt Restructurings. Under SFAS No. 15, the Amended and Restated Cisco Note was recorded at its principal amount of $17.0 million plus the estimated future interest payments of $0.8 million.

Convertible Subordinated Notes.

In connection with the March 2003 exchange and settlement related to our Convertible Subordinated Notes, we eliminated $106.7 of principal and $2.0 million of accrued interest. The terms of the remaining $10.2 million of Convertible Subordinated Notes were not impacted by the exchange and settlement and they continue to be due on June 15, 2007.

Contractual Obligations and Commitments

The following table summarizes our contractual cash obligations and other commercial commitments as of December 31, 2004:

	Payments due by period
	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
	(in thousands)
Long term debt	$	28,033	$	—	$	23,010	$	5,023	$	—
Capital lease obligations	169,296		15,938		27,602		23,117		102,639
Operating leases(1)	196,707		27,283		42,767		30,551		96,106
Unconditional purchase obligations	3,956		264		528		528		2,636
Total contractual cash obligations	397,992		43,485		93,907		59,219		201,381

(1)These amounts include $199.3 million of operating lease, maintenance and license agreement obligations, reduced by sublease agreements of $2.6 million.

32

Capital Lease Obligations.   The capital lease obligations above were incurred in connection with our IRUs for inter-city and intra-city dark fiber underlying substantial portions of our network. These capital leases are presented on our balance sheet at the net present value of the future minimum lease payments, or $103.4 million at December 31, 2004. These leases generally have terms of 15 to 25 years.

Letters of Credit.   We are also party to letters of credit totaling $1.7 million at December 31, 2004. These obligations are fully secured by our restricted investments, and as a result, are excluded from the contractual cash obligations above.

Future Capital Requirements

We believe that our cash on hand which includes cash obtained in 2005 from our line of credit, subordinated note and building sale, together with cash flows from operations, will be adequate to meet our working capital, capital expenditure, debt service and other cash requirements for the foreseeable future if we execute our business plan. Our business plan assumes, among other things, the following:

·our ability to maintain or increase the size of our current customer base; and

·our ability to achieve expected cost savings as a result of the integration of our recent acquisitions into our business.

Additionally, any future acquisitions or other significant unplanned costs or cash requirements may require that we raise additional funds through the issuance of debt or equity. We cannot assure you that such financing will be available on terms acceptable to us or our stockholders, or at all. Insufficient funds may require us to delay or scale back the number of buildings that we serve or require us to otherwise alter our business plan or take other actions that could have a material adverse effect on our business, results of operations and financial condition. If additional funds are raised by issuing equity securities, substantial dilution to existing stockholders may result.

We may elect to purchase or otherwise retire the remaining $10.2 million face value of Allied Riser notes with cash, stock or assets from time to time in open market or privately negotiated transactions, either directly or through intermediaries where we believe that market conditions are favorable to do so. Such purchases may have a material effect on our liquidity, financial condition and results of operations.

Public Offering

On February 14, 2005, we filed a registration statement on a Form S-1 with the Securities and Exchange Commission relating to the sale of up to $86.3 million of our common stock in our Public Offering. There can be no assurances that the offering will be completed.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Policies and Significant Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make

33

estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates including those related to allowances for doubtful accounts, revenue allowances, long-lived assets, contingencies and litigation, and the carrying values of assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The accounting policies we believe to be most critical to understanding our financial results and condition and that require complex, significant and subjective management judgments are discussed below. We have not experienced significant revisions to our assumptions except to the extent that they result from (1) variations in the trading price of our common stock which has caused us to revise the assumptions that we use in determining deferred compensation, (2) changes in the amount and aging of our accounts receivable which have caused us to revise the assumptions that we use in determining our allowance for doubtful accounts, (3) changes in interest rates which have caused us to revise the assumptions that we use in determining the present value of future minimum lease payments and (4) changes in estimated sub-lease income which has caused us to revise our restructuring accrual.

Revenue Recognition

We recognize service revenue when the services are performed, evidence of an arrangement exists, the fee is fixed and determinable and collection is probable. Service discounts and incentives offered to certain customers are recorded as a reduction of revenue when granted or ratably over the estimated customer life. Fees billed in connection with customer installations and other upfront charges are deferred and recognized ratably over the estimated customer life. We determine the estimated customer life using a historical analysis of customer retention. If our estimated customer life increases, we will recognize installation revenue over a longer period. We expense direct costs associated with sales as incurred.

Allowances for Sales Credits and Unfulfilled Purchase Obligations

We have established allowances to account for sales credit adjustments and unfulfilled contractual purchase obligations.

·Our allowance for sales credit adjustments is designed to account for reductions to our service revenue that occur when customers are granted a termination of service adjustment for amounts billed in advance or a service level agreement credit or discount. This allowance is provided for by reducing our gross service revenue and is determined by actual credits granted during the period and an estimate of unprocessed credits. At any point in time this allowance is determined by the amount and nature of credits granted prior to the balance sheet date.

·Our allowance for unfulfilled contractual purchase obligations is designed to account for non-payment of amounts under agreements that we have with certain of our customers that place minimum purchase obligations on them. Although we vigorously seek payments due pursuant to these purchase obligations, we have historically collected only approximately 4% of these payments. In order to allow for this we reduce our gross service revenue by the amount that has been invoiced to these customers. We reduce this allowance and recognize the related service revenue only upon the receipt of cash payments in respect of these invoices. At any point in time this allowance is determined by the amount of unfulfilled contractual purchase obligations invoiced to our customers and with respect to which we are continuing to seek payment. Once we submit these accounts receivable to a third party collection agency, this allowance is reduced.

34

Valuation Allowances for Doubtful Accounts Receivable and Deferred Tax Assets

We have established allowances that we use in connection with valuing expense charges associated with uncollectible accounts receivable and our deferred tax assets.

·Our valuation allowance for uncollectible accounts receivable is designed to account for the expense associated with writing off accounts receivable that we estimate will not be collected. We provide for this by increasing our selling, general and administrative expenses by the amount of receivables that we estimate will not be collected. We assess the adequacy of this allowance monthly by evaluating general factors, such as the length of time individual receivables are past due, historical collection experience, the economic and competitive environment, and changes in the credit-worthiness of our customers. We also assess the ability of specific customers to meet their financial obligations to us and establish specific allowances based on the amount we expect to collect from these customers. As of December 31, 2002, 2003 and 2004, respectively, our allowance for doubtful accounts receivable comprised, 26.8%, 36.1% and 19.2% of our total accounts receivable. For the years ended December 31, 2002, 2003 and 2004, our allowance for doubtful accounts expense accounted for 8.8%, 8.8% and 7.7% of our total SG&A expenses, respectively.

·Our valuation allowance for our net deferred tax asset is designed to take into account the uncertainty surrounding the realization of our net operating losses and our other deferred tax assets in the event that we record positive income for income tax purposes. For federal and state tax purposes, our net operating loss carry-forwards, including those that we have generated through our operations and those acquired in the Allied Riser merger could be subject to significant limitations on annual use. To account for this uncertainty we have recorded a valuation allowance for the full amount of our net deferred tax asset. As a result the value of our deferred tax assets on our balance sheet is zero.

Impairment of Long-Lived Assets

We review our long-lived assets, including property and equipment, and intangible assets with definite useful lives to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount should be addressed pursuant to the Financial Accounting Standards Board’s (FASB) Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Pursuant to SFAS No. 144, impairment is determined by comparing the carrying value of these long-lived assets to our best estimate of future undiscounted cash flows expected to result from the use of the assets and their eventual disposition over the remaining useful life of the primary asset in the asset group. As of December 31, 2003 and December 31, 2004, we tested our long-lived assets for impairment. In the event that there are changes in the planned use of our long-lived assets, or our expected future undiscounted cash flows are reduced significantly, our assessment of our ability to recover the carrying value of these assets under SFAS No. 144 could change. Because our best estimate of undiscounted cash flows generated from these assets exceeds their carrying value for each of the periods presented, no impairment pursuant to SFAS No. 144 exists. However, because of the significant difficulties confronting the telecommunications industry, we believe that currently the fair value of our long-lived assets including our network assets and IRUs are significantly below the amounts we originally paid for them and may be less than their current depreciated cost basis. Our best estimate of future undiscounted cash flows is sensitive to changes in our estimated cash flows and any change in the lease period or in the designation of our primary asset in the asset group.

Business Combinations

We account for our business combinations pursuant to SFAS No. 141, Business Combinations. Under SFAS No. 141 we allocate the cost of an acquired entity to the assets acquired and liabilities assumed

35

based upon their estimated fair values at the date of acquisition. Intangible assets are recognized when they arise from contractual or other legal rights or if they are separable as defined by SFAS No. 141. We determine estimated fair values using quoted market prices, when available, present values determined at appropriate current interest rates, or multiples of monthly revenue for certain customer contracts. Consideration not in the form of cash is measured based upon the fair value of the consideration given.

Goodwill and Other Intangibles

We account for our intangible assets pursuant to SFAS No. 142, Goodwill and Other Intangible Assets. Under SFAS No. 142 we determine the useful lives of our intangible assets based upon the expected use of the intangible asset, contractual provisions, obsolescence and other factors. We amortized our intangible assets on a straight-line basis. We presently have no intangible assets that are not subject to amortization.

Other Accounting Policies

We record assets and liabilities under capital leases at the lesser of the present value of the aggregate future minimum lease payments or the fair value of the assets under lease.

We capitalize the direct costs incurred prior to an asset being ready for service as construction-in-progress. Construction-in-progress includes costs incurred under the construction contract, interest, and the salaries and benefits of employees directly involved with construction activities. Our capitalization of these costs is sensitive to the percentage of time and number of our employees involved in construction activities.

We estimate the fair market value of our Series H preferred stock based upon the number of common shares the Series H preferred stock converts into and the trading price of our common stock on the grant date. The fair market value of our Series H preferred stock is sensitive to changes in the trading price of our common stock.

Recent Accounting Pronouncements

In March 2004, the FASB ratified the consensuses reached by Emerging Issues Task Force in Issue No. 03-06, Participating Securities and the Two-Class Method under FASB Statement No. 128 (“EITF 03-06”). EITF 03-06 clarifies the definitional issues surrounding participating securities and requires companies to restate prior earnings per share amounts for comparative purposes upon adoption. We adopted the provisions of EITF 03-06 in the second quarter of 2004, and restated our previously disclosed basic earnings per share amounts to include our participating securities in basic earnings per share when including such shares would have a dilutive effect. As a result of the adoption and for comparative purposes, basic income per share available to common shareholders decreased from $10.99 to $2.78 for the quarter ended March 31, 2003, from $271.84 to $12.64 for the quarter ended September 30, 2003, and from $229.18 to $11.18 for the year ended December 31, 2003.

In December 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”). SFAS 123R requires all share-based payments to employees, including grants of stock options, to be recognized in the statement of operations based upon their fair values. We currently disclose the impact of valuing grants of stock options and recording the related compensation expense in a pro-forma footnote to our financial statements. Under SFAS 123R this alternative is no longer available. We will be required to adopt SFAS 123R in the third quarter of 2005 and as a result will record additional compensation expense in our statements of operations. The impact of the adoption of SFAS 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net (loss) income in the notes to our consolidated financial statements. We are currently evaluating the impact

36

of the adoption of SFAS 123(R) on our financial position and results of operations, including the valuation methods and support for the assumptions that underlie the valuation of the awards.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

All of our financial instruments that are sensitive to market risk are entered into for purposes other than trading. Our primary market risk exposure is related to our marketable securities and currency fluctuations of the euro and the Canadian dollar versus the United States dollar. We place our marketable securities investments in instruments that meet high credit quality standards as specified in our investment policy guidelines. Marketable securities were approximately $14.3 million at December 31, 2004, $13.8 million of which are considered cash equivalents and mature in 90 days or less and $0.5 million are short-term investments, $0.4 million of which are restricted for collateral against letters of credit. We also own commercial paper investments and certificates of deposit totaling $1.4 million that are classified as other long-term assets. These investments are also restricted for collateral against letters of credit.

Our debt obligations at December 31, 2004 carry fixed interest rates and are not subject to changes in interest rates. Our $10.0 million line of credit which we entered into in March 2005 is indexed to the prime rate plus 1.5% and may, in certain circumstances be reduced to the prime rate plus 0.5%. Interest on our Amended and Restated Cisco Note will not accrue until February 2006, unless we default under the terms of the note. When the note accrues interest, interest accrues at the 90-day LIBOR rate plus 4.5%. Based upon the borrowing rates for debt arrangements with similar terms we estimate the fair value of our Allied Riser convertible subordinated notes at $8.6 million and the fair value of our Amended and Restated Cisco Note at $14.6 million. If interest rates were to increase by 10% we estimate that these fair values would be $8.3 million and $14.3 million, respectively.

Our European operations expose us to currency fluctuations and exchange rate risk. For example, while we record revenues and financial results from our European operations in euros, these results are reflected in our consolidated financial statements in U.S. dollars. Therefore, our reported results are exposed to fluctuations in the exchange rates between the U.S. dollar and the euro. In particular, we fund the euro-based operating expenses and associated cash flow requirements of our European operations, including IRU obligations, in U.S. dollars. Accordingly, in the event that the euro strengthens versus the dollar to a greater extent, the expenses and cash flow requirements associated with our European operations may be significantly higher in U.S.-dollar terms than planned.

37

ITEM 8.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		39
Consolidated Balance Sheets as of December 31, 2003 and 2004		40
Consolidated Statements of Operations for the years ended December 31, 2002, December 31, 2003 and December 31, 2004		41
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2002, December 31, 2003 and December 31, 2004		42
Consolidated Statements of Cash Flows for the years ended December 31, 2002, December 31, 2003 and December 31, 2004		45
Notes to Consolidated Financial Statements		47

38

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Cogent Communications Group, Inc.,

We have audited the accompanying consolidated balance sheets of Cogent Communications Group, Inc. and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedules listed in the index at Item 15(a)2. These financial statements and schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cogent Communications Group, Inc. and subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for the each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

As discussed in Note 1 to the financial statements, in 2004 the Company adopted Emerging Issues Task Force Issue No. 03-06, Participating Securities and the Two Class Method under FASB Statement No. 128.

	/s/ ERNST & YOUNG LLP
McLean, VA
March 30, 2005

39

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2003 AND 2004
(IN THOUSANDS, EXCEPT SHARE DATA)

	2003			2004
Assets
Current assets:
Cash and cash equivalents	$	7,875		$	13,844
Short term investments ($173 and $355 restricted, respectively)	3,535			509
Accounts receivable, net of allowance for doubtful accounts of $2,868 and $3,229, respectively	5,066			13,564
Prepaid expenses and other current assets	905			4,224
Total current assets	17,381			32,141
Property and equipment:
Property and equipment	400,097			475,105
Accumulated depreciation and amortization	(85,691		)	(137,830		)
Total property and equipment, net	314,406			337,275
Intangible assets:
Intangible assets	26,947			30,240
Accumulated amortization	(18,671		)	(27,115		)
Total intangible assets, net	8,276			3,125
Asset held for sale	—			1,220
Other assets ($2,188 and $1,370 restricted, respectively)	4,377			4,825
Total assets	$	344,440		$	378,586
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	7,296		$	16,090
Accrued liabilities	7,885			21,808
Current maturities, capital lease obligations	3,646			7,488
Total current liabilities	18,827			45,386
Amended and Restated Cisco Note—related party	17,842			17,842
Capital lease obligations, net of current maturities	58,107			95,887
Convertible subordinated notes, net of discount of $6,084 and $5,026, respectively	4,107			5,165
Other long term liabilities	803			1,816
Total liabilities	99,686			166,096
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, Series F, $0.001 par value; 11,000 shares authorized, issued and outstanding; liquidation preference of $11,000	10,904			10,904
Convertible preferred stock, Series G, $0.001 par value; 41,030 shares authorized, 41,030 and 41,021 issued and outstanding, respectively; liquidation preference of $123,000	40,787			40,778
Convertible preferred stock, Series H, $0.001 par value; 84,001 shares authorized, 53,372 and 45,821 shares issued and outstanding, respectively; liquidation preference of $7,731	45,990			44,309
Convertible preferred stock, Series I, $0.001 par value; 3,000 shares authorized, none and 2,575 shares issued and outstanding, respectively; liquidation preference of $7,725	—			2,545
Convertible preferred stock, Series J, $0.001 par value; 3,891 shares authorized, none and 3,891 shares issued and outstanding, respectively; liquidation preference of $58,365	—			19,421
Convertible preferred stock, Series K, $0.001 par value; 2,600 shares authorized, none and 2,600 shares issued and outstanding, respectively; liquidation preference of $7,800	—			2,588
Convertible preferred stock, Series L, $0.001 par value; 185 shares authorized, none and 185 shares issued and outstanding, respectively; liquidation preference of $2,781	—			927
Convertible preferred stock, Series M, $0.001 par value; 3,701 shares authorized, none and 3,701 shares issued and outstanding, respectively; liquidation preference of $55,508	—			18,353
Common stock, $0.001 par value; 75,000,000 shares authorized; 653,567 and 827,487 shares issued and outstanding, respectively	1			1
Additional paid-in capital	232,474			236,692
Deferred compensation	(32,680		)	(22,533		)
Stock purchase warrants	764			764
Treasury stock, 61,462 shares	(90		)	(90		)
Accumulated other comprehensive income—foreign currency translation adjustment	628			1,515
Accumulated deficit	(54,024		)	(143,684		)
Total stockholders’ equity	244,754			212,490
Total liabilities and stockholders’ equity	$	344,440		$	378,586

The accompanying notes are an integral part of these consolidated balance sheets.

40

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002, DECEMBER 31, 2003 AND DECEMBER 31, 2004
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

	2002			2003			2004
Service revenue, net	$	51,913		$	59,422		$	91,286
Operating expenses:
Network operations (including $233, $1,307 and $858 of amortization of deferred compensation, respectively)	49,324			48,324			64,324
Selling, general, and administrative (including $3,098, $17,368 and $11,404 of amortization of deferred compensation, and $3,209, $3,876 and $3,995 of bad debt expense, respectively)	36,593			43,938			51,786
Gain on settlement of vendor litigation	(5,721		)	—			—
Restructuring charge	—			—			1,821
Terminated public offering costs	—			—			779
Depreciation and amortization	33,990			48,387			56,645
Total operating expenses	114,186			140,649			175,355
Operating loss	(62,273		)	(81,227		)	(84,069		)
Gain—Cisco credit facility—troubled debt restructuring—related party	—			215,432			—
Gain—Allied Riser note exchange	—			24,802			—
Settlement of note holder litigation	(3,468		)	—			—
Gains—lease and other obligation restructurings	—			—			5,292
Interest income and other	1,739			1,512			2,119
Interest expense	(36,284		)	(19,776		)	(13,002		)
(Loss) income before extraordinary item	$	(100,286	)	$	140,743		$	(89,660	)
Extraordinary gain—Allied Riser merger	8,443			—			—
Net (loss) income	$	(91,843	)	$	140,743		$	(89,660	)
Beneficial conversion charges	—			(52,000		)	(43,986		)
Net (loss) income applicable to common shareholders	$	(91,843	)	$	88,743		$	(133,646	)
Net (loss) income per common share:
(Loss) income before extraordinary item	$	(616.34	)	$	17.74		$	(117.43	)
Extraordinary gain	51.89			—			—
Basic net (loss) income per common share	$	(564.45	)	$	17.74		$	(117.43	)
Beneficial conversion charge	—			$	(6.55	)	$	(57.61	)
Basic net (loss) income per common share available to common shareholders	$	(564.45	)	$	11.18		$	(175.03	)
Diluted net (loss) income per common share—before extraordinary item	$	(616.34	)	$	17.73		$	(117.43	)
Extraordinary gain	51.89			—			—
Diluted net (loss) income per common share	$	(564.45	)	$	17.73		$	(117.43	)
Beneficial conversion charge	—			$	(6.55	)	$	(57.61	)
Diluted net (loss) income per common share available to common shareholders	$	(564.45	)	$	11.18		$	(175.03	)
Weighted-average common shares—basic	162,712			7,935,831			763,540
Weighted-average common shares—diluted	162,712			7,938,898			763,540

The accompanying notes are an integral part of these consolidated statements.

41

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002 DECEMBER 31, 2003 AND DECEMBER 31, 2004
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

	Common Stock				Additional Paid-in			Deferred			Treasury			Stock Purchase			Preferred Stock—A				Preferred Stock—B				Preferred Stock—C
	Shares		Amount		Capital			Compensation			Stock			Warrants			Shares		Amount		Shares		Amount		Shares		Amount
Balance at December 31, 2001	70,491			$ —		$ 38,725			$ (11,081	)		$ —			$ 8,248		26,000,000		$ 25,892		19,809,783		$ 90,009		49,773,402		$ 61,345
Exercises of stock options	365			—		1			—			—			—		—		—		—		—		—		—
Issuance of common stock, options and warrants—Allied Riser merger	100,484			—		10,233			—			—			764		—		—		—		—		—		—
Deferred compensation adjustments	—			—		(1,756	)		1,726			—			—		—		—		—		—		—		—
Conversion of Series B convertible preferred stock	2,853			—		2,000			—			—			—		—		—		(439,560	)	(2,000	)	—		—
Foreign currency translation	—			—		—			—			—			—		—		—		—		—		—		—
Amortization of deferred compensation	—			—		—			3,331			—			—		—		—		—		—		—		—
Net loss	—			—		—			—			—			—		—		—		—		—		—		—
Balance at December 31, 2002	174,192			—		49,203			(6,024	)		—			9,012		26,000,000		25,892		19,370,223		88,009		49,773,402		61,345
Cancellations of shares granted to employees	—			—		(569	)		995			—			—		—		—		—		—		—		—
Amortization of deferred compensation	—			—		—			18,675			—			—		—		—		—		—		—		—
Foreign currency translation	—			—		—			—			—			—		—		—		—		—		—		—
Issuances of preferred stock, net	—			—		—			(46,416	)		—			—		—		—		—		—		—		—
Conversion of preferred stock into common stock	538,786			1		183,753			—			—			(8,248	)	(26,000,000	)	(25,892	)	(19,362,531	)	(87,974	)	(49,773,402	)	(61,345	)
Cancellation of common stock—treasury stock	(61,291	)		—		—			90			(90	)		—		—		—		—		—		—		—
Shares returned to treasury—Allied Riser merger	(171	)		—		—			—			—			—		—		—		—		—		—		—
Common shares issued—Allied Riser merger	2,051			—		—
Cancellation of Series B preferred stock	—			—		35			—			—			—		—		—		(7,692	)	(35	)	—		—
Issuance of options for common stock—FNSI acquisition	—			—		52			—			—			—		—		—		—		—		—		—
Beneficial conversion charge	—			—		52,000			—			—			—		—		—		—		—		—		—
Reclassification of beneficial conversion charge to additional paid in capital	—			—		(52,000	)		—			—			—		—		—		—		—		—		—
Net income	—			—		—			—			—			—		—		—		—		—		—		—
Balance at December 31, 2003	653,567			—		232,475			(32,680	)		(90	)		764		—		—		—		—		—		—
Cancellations of shares granted to employees	—			—		—			4,966			—			—		—		—		—		—		—		—
Amortization of deferred compensation	—			—		—			12,262			—			—		—		—		—		—		—		—
Foreign currency translation	—			—		—			—			—			—		—		—		—		—		—		—
Issuances of preferred stock, net	—			—		—			(2,370	)		—			—		—		—		—		—		—		—
Issuances of options for preferred stock	—			—		—			(4,711	)		—			—		—		—		—		—		—		—
Conversion of preferred stock into common stock	173,920			—		3,808			—			—			—		—		—		—		—		—		—
Beneficial conversion charge	—			—		43,896			—			—			—		—		—		—		—		—		—
Reclassification of beneficial conversion charge to additional paid in capital	—			—		(43,896	)		—			—			—		—		—		—		—		—		—
Contribution of capital—LNG—related party	—			—		410			—			—			—		—		—		—		—		—		—
Net loss	—			—		—			—			—			—		—		—		—		—		—		—
Balance at December 31, 2004	827,487			$ 1		$ 236,692			$ (22,533	)		$ (90	)		$    764		—		$         —		—		$         —		—		$         —

42

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2002 DECEMBER 31, 2003 AND DECEMBER 31, 2004
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

	Preferred Stock—D				Preferred Stock—E				Preferred Stock—F		Preferred Stock—G				Preferred Stock—H				Preferred Stock—I
	Shares		Amount		Shares		Amount		Shares	Amount	Shares		Amount		Shares		Amount		Shares		Amount
Balance at December 31, 2001	—		$        —		—		$        —		—	$         —	—		$         —		—		$         —			—		$     —
Exercises of stock options	—		—		—		—		—	—	—		—		—		—			—		—
Issuance of common stock, options and warrants—Allied Riser merger	—		—		—		—		—	—	—		—		—		—			—		—
Deferred compensation adjustments	—		—		—		—		—	—	—		—		—		—			—		—
Conversion of Series B convertible preferred stock	—		—		—		—		—	—	—		—		—		—			—		—
Foreign currency translation	—		—		—		—		—	—	—		—		—		—			—		—
Amortization of deferred compensation	—		—		—		—		—	—	—		—		—		—			—		—
Net loss	—		—		—		—		—	—	—		—		—		—			—		—
Balance at December 31, 2002	—		—		—		—		—	—	—		—		—		—			—		—
Cancellations of shares granted to employees	—		—		—		—		—	—	—		—		(500	)	(426	)		—		—
Amortization of deferred compensation	—		—		—		—		—	—	—		—		—		—			—		—
Foreign currency translation	—		—		—		—		—	—	—		—		—		—			—		—
Issuances of preferred stock, net	3,426,293		4,272		3,426,293		4,272		11,000	10,904	41,030		40,787		53,873		46,416			—		—
Conversion of preferred stock into common stock	(3,426,293	)	(4,272	)	(3,426,293	)	(4,272	)	—	—	—		—		—		—			—		—
Cancellation of common stock—treasury stock	—		—		—		—		—	—	—		—		—		—			—		—
Shares returned to treasury—Allied Riser merger	—		—		—		—		—	—	—		—		—		—			—		—
Common shares issued—Allied Riser merger	—		—		—		—		—	—	—		—		—		—			—		—
Cancellation of Series B preferred stock	—		—		—		—		—	—	—		—		—		—			—		—
Issuance of options for common stock—FNSI acquisition	—		—		—		—		—	—	—		—		—		—			—		—
Beneficial conversion charge	—		—		—		—		—	—	—		—		—		—			—		—
Reclassification of beneficial conversion charge to additional paid in capital	—		—		—		—		—	—	—		—		—		—			—		—
Net income	—		—		—		—		—	—	—		—		—		—			—		—
Balance at December 31, 2003	—		—		—		—		11,000	10,904	41,030		40,787		53,373		45,990			—		—
Cancellations of shares granted to employees	—		—		—		—		—	—	—		—		(5,127	)	(4,965	)		—		—
Amortization of deferred compensation	—		—		—		—		—	—	—		—		—		—			—		—
Foreign currency translation	—		—		—		—		—	—	—		—		—		—			—		—
Issuances of preferred stock, net	—		—		—		—		—	—	—		—		1,913		2,370			2,575		2,545
Issuances of options for preferred stock	—		—		—		—		—	—	—		—		—		4,711			—		—
Conversion of preferred stock into common stock	—		—		—		—		—	—	(9	)	(9	)	(4,338	)	(3,797	)		—		—
Beneficial conversion charge	—		—		—		—		—	—	—		—		—		—			—		—
Reclassification of beneficial conversion charge to additional paid in capital	—		—		—		—		—	—	—		—		—		—			—		—
Contribution of capital—LNG	—		—		—		—		—	—	—		—		—		—
Net loss	—		—		—		—		—	—	—		—		—		—			—		—
Balance at December 31, 2004	—		$        —		—		$        —		11,000	$ 10,904	41,021		$ 40,778		45,821		$ 44,309			2,575		$ 2,545

43

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2002 DECEMBER 31, 2003 AND DECEMBER 31, 2004
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Preferred Stock—J		Preferred Stock—K		Preferred Stock —L		Preferred Stock—M		Foreign Currency Translation	Accumulated	Total Stockholder's	Comprehensive
Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Adjustment	Deficit	Equity	Income (Loss)

Balance at December 31, 2001	—	$        —	—	$     —	—	$  —	—	$        —	$     —		$ (102,924	)	$ 110,214		$          —
Exercises of stock options	—	—	—	—	—	—	—	—	—		—		1		—
Issuance of common stock, options and warrants—Allied Riser merger	—	—	—	—	—	—	—	—	—		—		10,997		—
Deferred compensation adjustments	—	—	—	—	—	—	—	—	—		—		(30	)	—
Conversion of Series B convertible preferred stock	—	—	—	—	—	—	—	—	—		—		(0	)
Foreign currency translation	—	—	—	—	—	—	—	—	(44	)	—		(44	)	(44	)
Amortization of deferred compensation	—	—	—	—	—	—	—	—	—		—		3,331		—
Net loss	—	—	—	—	—	—	—	—	—		(91,843	)	(91,843	)	(91,843	)
Balance at December 31, 2002	—	—	—	—	—	—	—	—	(44	)	(194,767	)	32,626		(91,887	)
Cancellations of shares granted to employees	—	—	—	—	—	—	—	—	—		—		—		—
Amortization of deferred compensation	—	—	—	—	—	—	—	—	—		—		18,675		—
Foreign currency translation	—	—	—	—	—	—	—	—	672		—		672		672
Issuances of preferred stock, net	—	—	—	—	—	—	—	—	—		—		60,235		—
Conversion of preferred stock into common stock	—	—	—	—	—	—	—	—	—		—		(8,249	)	—
Cancellation of common stock—treasury stock	—	—	—	—	—	—	—	—	—		—		(0	)	—
Shares returned to treasury—Allied Riser merger	—	—	—	—	—	—	—	—	—		—		—		—
Common shares issued—Allied Riser merger	—	—	—	—	—	—	—	—	—		—		—		—
Cancellation of Series B preferred stock	—	—	—	—	—	—	—	—	—		—		—		—
Issuance of options for common stock—FNSI acquisition	—	—	—	—	—	—	—	—	—		—		52		—
Beneficial conversion charge	—	—	—	—	—	—	—	—	—		(52,000	)	—		—
Reclassification of beneficial conversion charge to additional paid in capital	—	—	—	—	—	—	—	—	—		52,000		—		—
Net income	—	—	—	—	—	—	—	—	—		140,743		140,743		140,743
Balance at December 31, 2003	—	—	—	—	—	—	—	—	628		(54,024	)	244,754		141,415
Cancellations of shares granted to employees	—	—	—	—	—	—	—	—	—		—		1		—
Amortization of deferred compensation	—	—	—	—	—	—	—	—	—		—		12,262		—
Foreign currency translation	—	—	—	—	—	—	—	—	887		—		887		887
Issuances of preferred stock, net	3,891	19,421	2,600	2,588	185	927	—	—	—		—		25,481		—
Issuances of options for preferred stock	—	—	—	—	—	—	—	—	—		—		—		—
Conversion of preferred stock into common stock	—	—	—	—	—	—	3,701	18,353	—		—		18,355		—
Beneficial conversion charge	—	—	—	—	—	—	—	—	—		(43,896	)	—		—
Reclassification of beneficial conversion charge to additional paid in capital	—	—	—	—	—	—	—	—	—		43,896		—		—
Contribution of capital—LNG	—	—	—	—	—	—	—	—	—		—		410		—
Net loss	—	—	—	—	—	—	—	—	—		(89,660	)	(89,660	)	(89,660	)
Balance at December 31, 2004	3,891	$ 19,421	2,600	$ 2,588	185	$ 927	3,701	$ 18,353	$ 1,515		$ (143,684	)	$ 212,490		$ (88,773	)

44

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, DECEMBER 31, 2003 AND DECEMBER 31, 2004
(IN THOUSANDS)

	2002			2003			2004
Cash flows from operating activities:
Net (loss) income	$	(91,843	)	$	140,743		$	(89,660	)
Adjustments to reconcile net (loss) income to net cash used in operating activities
Depreciation and amortization, including amortization of debt issuance costs	36,490			49,746			56,645
Amortization of debt discount—convertible notes	6,086			1,827			1,058
Amortization of deferred compensation	3,331			18,675			12,262
Extraordinary gain—Allied Riser merger	(8,443		)	—			—
Gain—Cisco credit facility troubled debt restructuring (Note 7)	—			(215,432		)	—
Gain—Allied Riser note exchange	—			(24,802		)	—
Gain on settlement of vendor litigation	(5,721		)	—			—
Gain—sale of warrant	—			—			(853		)
Gains—lease obligation restructurings	—			—			(5,292		)
Gains and losses—other	—			—			21
Changes in assets and liabilities:
Accounts receivable	(2,894		)	712			2,274
Prepaid expenses and other current assets	1,189			744			2,256
Other assets	1,134			1,899			1,565
Accounts payable and accrued liabilities	19,104			(1,469		)	(6,701		)
Net cash used in operating activities	(41,567		)	(27,357		)	(26,425		)
Cash flows from investing activities:
Purchases of property and equipment	(75,214		)	(24,016		)	(10,135		)
Purchases of intangible assets	(9,617		)	(700		)	(317		)
Cash acquired in Allied Riser merger	70,431			—			—
Purchase of minority interests in Cogent Canada	(3,617		)	—			—
(Purchases) sales of short term investments, net	(1,769		)	(600		)	3,026
Cash acquired—acquisitions	—			—			2,336
Purchase of fiber optic network in Germany	—			—			(1,949		)
Proceeds from sale of equipment	—			—			279
Proceeds from sale of warrant	—			—			3,449
Proceeds from other assets—Cogent Europe acquisition	—			—			610
Net cash used in  investing activities	(19,786		)	(25,316		)	(2,701		)
Cash flows from financing activities:
Borrowings under Cisco credit facility	54,395			8,005			—
Exchange agreement payment—Allied Riser notes	—			(4,997		)	—
Exchange agreement payment—Cisco credit facility debt restructuring	—			(20,000		)	—
Proceeds from option exercises	1			—			—
Repayment of capital lease obligations	(2,702		)	(3,076		)	(6,630		)
Repayment of advances from LNG Holdings—related party	—			—			(1,242		)
Cash acquired—mergers	—			—			42,358
Issuances of preferred stock, net of issuance costs	—			40,630			—
Net cash provided by financing activities	51,694			20,562			34,486
Effect of exchange rate changes on cash	(44		)	672			609
Net (decrease) increase in cash and cash equivalents	(9,703		)	(31,439		)	5,969
Cash and cash equivalents, beginning of year	49,017			39,314			7,875
Cash and cash equivalents, end of year	$	39,314		$	7,875		$	13,844
Supplemental disclosures of cash flow information:
Cash paid for interest	$	12,440		$	5,013		$	10,960
Cash paid for income taxes	—			—			—
Non-cash financing activities—
Capital lease obligations incurred	33,027			6,044			968

The accompanying notes are an integral part of these consolidated statements.

45

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 2002, DECEMBER 31, 2003 AND DECEMBER 31, 2004
(IN THOUSANDS)

	2002			2003		2004
Borrowing under credit facility for payment of loan costs and interest	14,820			4,502		—
Issuance of Series I preferred stock for Symposium Gamma common stock	—			—		2,575
Issuance of Series J preferred stock for Symposium Omega common stock	—			—		19,454
Issuance of Series K preferred stock for UFO Group common stock	—			—		2,600
Issuance of Series L preferred stock for Global Access assets	—			—		927
Issuance of Series M preferred stock for Cogent Potomac common stock	—			—		18,352
Allied Riser Merger
Fair value of assets acquired	$	74,791
Less: valuation of common stock, options & warrants issued	(10,967		)
Less: extraordinary gain	(8,443		)
Fair value of liabilities assumed	$	55,381
PSINet Acquisition
Fair value of assets acquired	16,602			700
Less: cash paid	(9,450		)	(700	)
Fair value of liabilities assumed	7,152			—
FNSI Acquisition
Fair value of assets acquired				3,018
Less: valuation of options for common stock				(52	)
Fair value of liabilities assumed				2,966
Symposium Gamma (Cogent Europe) Acquisition
Fair value of assets acquired						155,468
Negative goodwill						(77,232	)
Less: valuation of preferred stock						(2,575	)
Fair value of liabilities assumed						75,661
Symposium Omega Acquisition
Fair value of assets acquired						19,454
Less: valuation of preferred stock						(19,454	)
Fair value of liabilities assumed						—
UFO Group Acquisition
Fair value of assets acquired						3,326
Less: valuation of preferred stock						(2,600	)
Fair value of liabilities assumed						726
Global Access Acquisition
Fair value of assets acquired						1,931
Less: valuation of preferred stock						(927	)
Fair value of liabilities assumed						1,004
Cogent Potomac (Aleron) Acquisition
Fair value of assets acquired						20,622
Less: valuation of preferred stock						(18,352	)
Fair value of liabilities assumed						2,270
Verio Acquisition
Fair value of assets acquired						4,493
Fair value of liabilities assumed						4,493

See Note 7, which describes the Exchange Agreement with Cisco Capital and conversion of preferred stock under the Purchase Agreement where preferred stock was issued in connection with a troubled debt restructuring.

The accompanying notes are an integral part of these consolidated statements.

46

COGENT COMMUNICATIONS GROUP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002, 2003, and 2004

1.   Description of the business, recent developments and summary of significant accounting policies:

Description of business

Cogent Communications, Inc. (“Cogent”) was formed on August 9, 1999, as a Delaware corporation and is headquartered in Washington, DC. In 2001, Cogent formed Cogent Communications Group, Inc., (the “Company”), a Delaware corporation. Effective on March 14, 2001, Cogent’s stockholders exchanged all of their outstanding common and preferred shares for an equal number of shares of the Company, and Cogent became a wholly owned subsidiary of the Company. This was a tax-free exchange that was accounted for by the Company at Cogent’s historical cost.

The Company is a leading facilities-based provider of low-cost, high-speed Internet access and Internet Protocol communications services. The Company’s network is specifically designed and optimized to transmit data using IP. The Company delivers its services to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations through over 8,700 customer connections in North America and Europe.

The Company’s primary on-net service is Internet access at a speed of 100 Megabits per second, much faster than typical Internet access currently offered to businesses. The Company offers this on-net service exclusively through its own facilities, which run all the way to its customers’ premises. Because of its integrated network architecture, the Company is not dependent on local telephone companies to serve its on-net customers. The Company’s typical customers in multi-tenant office buildings are law firms, financial services firms, advertising and marketing firms and other professional services businesses. The Company also provides on-net Internet access at a speed of one Gigabit per second and greater to certain bandwidth-intensive users such as universities, other ISPs and commercial content providers.

In addition to providing on-net services, the Company also provides Internet connectivity to customers that are not located in buildings directly connected to its network. The Company serves these off-net customers using other carriers’ facilities to provide the “last mile” portion of the link from its customers’ premises to the Company’s network. The Company also operates 30 data centers throughout North America and Europe that allow customers to colocate their equipment and access our network, and from which the Company provides managed modem service.

The Company has created its network by purchasing optical fiber from carriers with large amounts of unused fiber and directly connecting Internet routers to the existing optical fiber national backbone. The Company has expanded its network through several acquisitions of financially distressed companies or their assets. The overall impact of these acquisitions on the operation of its business has been to extend the physical reach of the Company’s network in both North America and Europe, expand the breadth of its service offerings, and increase the number of customers to whom the Company provides its services.

Recent Developments

Reverse Stock Split

In March 2005, the Company effected a 1-for-20 reverse stock split. Accordingly, all share and per share amounts have been retroactively adjusted to give effect to this event.

47

Equity Conversion

In February 2005, the Company’s holders of its preferred stock elected to convert all of their shares of preferred stock into shares of the Company’s common stock (the “Equity Conversion”). As a result, the Company no longer has outstanding shares of preferred stock and the liquidation preferences on preferred stock have been eliminated.

Withdrawal of Public Offering

In May 2004, the Company filed a registration statement to sell shares of common stock in a public offering. In October 2004, the Company withdrew the public offering and expensed the associated costs of approximately $0.8 million.

Public Offering

In February 2005, the Company filed a registration statement to sell up to $86.3 million of shares of its common stock in a Public Offering. There can be no assurances that the Public Offering will be completed. If the Public Offering is successful, substantial dilution to existing stockholders may result.

Management’s Plans, Liquidity and Business Risks

The Company has experienced losses since its inception in 1999 and as of December 31, 2004 has an accumulated deficit of $143.7 million and a working capital deficit of $13.2 million. The Company operates in the rapidly evolving Internet services industry, which is subject to intense competition and rapid technological change, among other factors. The successful execution of the Company’s business plan is dependent upon the Company’s ability to increase and retain its customers, its ability to integrate acquired businesses and purchased assets into its operations and realize planned synergies, the extent to which acquired businesses and assets are able to meet the Company’s expectations and projections, the Company’s ability to retain and attract key employees, and the Company’s ability to manage its growth and geographic expansion, among other factors.

In February 2005, the Company issued a subordinated note for $10 million in cash (Note 15). In March 2005, the Company entered into a $10.0 million line of credit facility and borrowed $10.0 million under this facility, of which $4.0 million is restricted and held by the lender (Note 15). In March 2005, the Company sold its building located in Lyon, France for net proceeds of approximately 3.8 million euros ($5.1 million) (Note 15). Management believes that cash generated from the Company’s operations combined with the amounts received from these transactions is adequate to meet the Company’s future funding requirements. Although management believes that the Company will successfully mitigate its risks, management cannot give any assurance that it will be able to do so or that the Company will ever operate profitably.

Any future acquisitions, other significant unplanned costs or cash requirements may require the Company to raise additional funds through the issuance of debt or equity. Such financing may not be available on terms acceptable to the Company or its stockholders, or at all. Insufficient funds may require the Company to delay or scale back the number of buildings that it serves or require the Company to restructure its business. If additional funds are raised by issuing equity securities, substantial dilution to existing stockholders may result.

Acquisitions

Since the Company’s inception, it has consummated several acquisitions through which it has generated revenue growth, expanded its network and customer base and added strategic assets to its business (Note 2).

48

Summary of Significant Accounting Policies

Principles of consolidation

The consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and include the accounts of the Company and all of its wholly-owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain previously reported 2003 balance sheet amounts have been reclassified in order to be consistent with the 2004 balance sheet presentation.

Revenue recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition.” The Company’s service offerings consist of telecommunications services generally under month-to-month or annual contracts and billed monthly in advance. Net revenues from telecommunication services are recognized when the services are performed, evidence of an arrangement exists, the fee is fixed and determinable and collection is probable. The probability of collection is determined by an analysis of a new customer’s credit history and historical payment patterns for existing customers. Service discounts and incentives related to telecommunication services are recorded as a reduction of revenue when granted. Fees billed in connection with customer installations and other non-refundable upfront charges are deferred and recognized ratably over the estimated customer life determined by a historical analysis of customer retention.

The Company establishes a valuation allowance for collection of doubtful accounts and other sales credit adjustments. Valuation allowances for sales credits are established through a charge to revenue, while valuation allowances for doubtful accounts are established through a charge to selling, general and administrative expenses. The Company assesses the adequacy of these reserves on a monthly basis by evaluating general factors, such as the length of time individual receivables are past due, historical collection experience, the economic and competitive environment, changes in the credit worthiness of its customers and unprocessed customer cancellations. The Company believes that its established valuation allowances were adequate as of December 31, 2003 and 2004. If circumstances relating to specific customers change or economic conditions worsen such that the Company’s past collection experience and assessment of the economic environment are no longer relevant, the Company’s estimate of the recoverability of its trade receivables could be further reduced.

The Company invoices certain customers for amounts contractually due for unfulfilled minimum contractual obligations and recognizes a corresponding sales allowance equal to this revenue resulting in the recognition of zero net revenue at the time the customer is billed. The Company recognizes net revenue as these billings are collected in cash. The Company vigorously seeks payment of these amounts.

Network operations

Network operations include costs associated with service delivery, network management, and customer support. This includes the costs of personnel and related operating expenses associated with these activities, network facilities costs, fiber maintenance fees, leased circuit costs, and access fees paid to office building owners.

International Operations

The Company began recognizing revenue from operations in Canada through its wholly owned subsidiary, ARC Canada effective with the closing of the Allied Riser merger on February 4, 2002. All

49

revenue is reported in United States dollars. Revenue for ARC Canada for the period from February 4, 2002 to December 31, 2002 and the years ended December 31, 2003 and 2004 was $4.3 million, $5.6 million and $6.2 million, respectively. ARC Canada’s total assets were $11.8 million at December 31, 2003 and $11.4 million at December 31, 2004.

The Company began recognizing revenue from operations in Europe effective with the January 5, 2004 acquisition of Cogent Europe. All revenue is reported in United States dollars. Revenue for the Company’s European operations for the year ended December 31, 2004 was $23.3 million. Cogent Europe’s total consolidated assets were $68.3 million at December 31, 2004.

Foreign Currency Translation Adjustment and Comprehensive Income (Loss)

The functional currency of ARC Canada is the Canadian dollar. The functional currency of Cogent Europe is the euro. The consolidated financial statements of ARC Canada, and Cogent Europe, are translated into U.S. dollars using the period-end foreign currency exchange rates for assets and liabilities and the average foreign currency exchange rates for revenues and expenses. Gains and losses on translation of the accounts of the Company’s non-U.S. operations are accumulated and reported as a component of other comprehensive income in stockholders’ equity.

Statement of Financial Accounting Standard (“SFAS”) No. 130, “Reporting of Comprehensive Income” requires “comprehensive income” and the components of “other comprehensive income” to be reported in the financial statements and/or notes thereto. The Company’s only components of “other comprehensive income” are currency translation adjustments for all periods presented.

Financial instruments

The Company considers all highly liquid investments with an original maturity of three months or less at purchase to be cash equivalents. The Company determines the appropriate classification of its investments at the time of purchase and reevaluates such designation at each balance sheet date. At December 31, 2003 and 2004, the Company’s marketable securities consisted of money market accounts, certificates of deposit and commercial paper.

The Company is party to letters of credit totaling approximately $1.7 million as of December 31, 2004 and $2.4 million at December 31, 2003. These letters of credit are secured by certificates of deposit and commercial paper investments of approximately $1.7 million at December 31, 2004 and $2.4 million at December 31, 2003 that are restricted and included in short-term investments and other assets.

At December 31, 2003 and 2004, the carrying amount of cash and cash equivalents, short-term investments, accounts receivable, prepaid and other current assets, accounts payable, and accrued expenses approximated fair value because of the short maturity of these instruments. Based upon the borrowing rates for debt arrangements with similar terms the Company estimates the fair value of the Allied Riser convertible subordinated notes at $8.6 million and the fair value of its Amended and Restated Cisco Note at $14.6 million.

The Allied Riser convertible subordinated notes due in June 2007 have a face value of $10.2 million. The notes were recorded at their fair value of approximately $2.9 million at the merger date. The resulting discount is being accreted to interest expense through the maturity date using the effective interest rate method.

Short-Term Investments

Short-term investments consist primarily of commercial paper and certificates of deposit with original maturities beyond three months, but less than 12 months. Such short-term investments are carried at cost, which approximates fair value due to the short period of time to maturity. Investments underlying our cash

50

equivalents and short-term investments are classified as “available for sale” in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”.

Credit risk

The Company’s assets that are exposed to credit risk consist of its cash equivalents, short-term investments, other assets and accounts receivable. The Company places its cash equivalents and short-term investments in instruments that meet high-quality credit standards as specified in the Company’s investment policy guidelines. Accounts receivable are due from customers located in major metropolitan areas in the United States, Western Europe and in Ontario Canada. Revenues from the Company’s net centric, formerly called “wholesale”, customers and customers obtained through business combinations are subject to a higher degree of credit risk than customers who purchase its traditional corporate, formerly called “retail”, service.

Property and equipment

Property and equipment are recorded at cost and depreciated once deployed using the straight-line method over the estimated useful lives of the assets. Useful lives are determined based on historical usage with consideration given to technological changes and trends in the industry that could impact the network architecture and asset utilization. The direct costs incurred prior to an asset being ready for service are reflected as construction in progress. Interest is capitalized during the construction period based upon the rates applicable to borrowings outstanding during the period. Construction in progress includes costs incurred under the construction contract related to a specific building prior to that building being ready for service (a “lit building”). System infrastructure includes capitalized interest, the capitalized salaries and benefits of employees directly involved with construction activities and costs incurred by third party contracts to construct and install the Company’s long-haul backbone network. Expenditures for maintenance and repairs are expensed as incurred. Assets and liabilities under capital leases are recorded at the lesser of the present value of the aggregate future minimum lease payments or the fair value of the assets under lease. Leasehold improvements include costs associated with building improvements.

Depreciation and amortization periods are as follows:

Type of asset	Depreciation or amortization period
Indefeasible rights of use (IRUs)	Shorter of useful life or IRU lease agreement; generally 15 to 20 years, beginning when the IRU is ready for use
Network equipment	5 to 10 years
Leasehold improvements	Shorter of lease term or useful life; generally 10 to 15 years
Software	5 years
Owned buildings	40 years
Office and other equipment	2 to 5 years
System infrastructure	10 years

Long-lived assets

The Company’s long-lived assets include property and equipment and identifiable intangible assets to be held and used. These long-lived assets are currently reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount should be addressed pursuant to Statement of Financial Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Pursuant to SFAS No. 144, impairment is determined by comparing the carrying value of these long-lived assets to management’s probability weighted estimate of the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. The cash flow projections used to make this assessment are consistent with the cash flow projections that management uses internally to assist in

51

making key decisions. In the event an impairment exists, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset, which is generally determined by using quoted market prices or valuation techniques such as the discounted present value of expected future cash flows, appraisals, or other pricing models. Management evaluated these assets for impairment as of December 31, 2003 and 2004 in accordance with SFAS No. 144. Management believes that no such impairment existed as of December 31, 2003 or 2004. In the event there are changes in the planned use of the Company’s long-term assets or the Company’s expected future undiscounted cash flows are reduced significantly, the Company’s assessment of its ability to recover the carrying value of these assets under SFAS No. 144 would change.

Because management’s best estimate of undiscounted cash flows generated from these assets exceeds their carrying value for each of the periods presented, no impairment pursuant to SFAS No. 144 exists. However, because of the significant difficulties confronting the telecommunications industry, management believes that the current fair value of our long-lived assets including our network assets and IRU’s are below the amounts the Company originally paid for them and may be less than their current depreciated cost basis.

Asset retirement obligations

In accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations,” the fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The Company measures changes in the liability for an asset retirement obligation due to passage of time by applying an interest method of allocation to the amount of the liability at the beginning of the period. The interest rate used to measure that change is the credit-adjusted risk-free rate that existed when the liability was initially measured.

Use of estimates

The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

Income taxes

The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under SFAS No. 109, deferred tax assets or liabilities are computed based upon the differences between financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. Deferred income tax expense or benefits are based upon the changes in the assets or liability from period to period.

Stock-based compensation

The Company accounts for its stock option plan and shares of restricted preferred stock granted under its 2003 Incentive Award Plan in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations using the intrinsic method. As such, compensation expense related to fixed employee stock options and restricted shares is recorded only if on the date of grant, the fair value of the underlying stock exceeds the exercise price.

The Company has adopted the disclosure only requirements of SFAS No. 123, “Accounting for Stock-Based Compensation,” which allows entities to continue to apply the provisions of APB Opinion

52

No. 25 for transactions with employees and to provide pro forma net income disclosures as if the fair value based method of accounting described in SFAS No. 123 had been applied to employee stock option grants and restricted shares. The following table illustrates the effect on net income and loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123 (in thousands except per share amounts):

	Year Ended December 31, 2002				Year Ended December 31, 2003				Year Ended December 31, 2004
Net (loss) income available to common stock, as reported		$	(91,843	)		$	88,743			$	(133,646	)
Add: stock-based employee compensation expense included in reported net loss, net of related tax effects		3,331				18,675				12,262
Deduct: total stock-based employee compensation expense determined under fair value based method, net of related tax effects		(4,721		)		(19,866		)		(12,523		)
Pro forma—net (loss) income		$	(93,233	)		$	87,552			$	(133,907	)
(Loss) income per share as reported—basic		$	(564.45	)		$	11.18			$	(175.03	)
Pro forma (loss) income per share—basic		$	(572.99	)		$	11.03			$	(175.38	)
(Loss) income per share as reported—diluted		$	(564.45	)		$	11.18			$	(175.03	)
Pro forma (loss) income per share—diluted		$	(572.99	)		$	11.03			$	(175.38	)

The weighted-average per share grant date fair value of options for common stock granted was $48.80 in 2002 and $11.20 in 2003. There were no options for common stock granted in 2004. The weighted-average per share grant date fair value of options for Series H preferred stock granted in 2004 was $238.97. The fair value of these options was estimated at the date of grant using the Black-Scholes method with the following weighted-average assumptions for 2002—an average risk-free rate of 3.5 percent, a dividend yield of 0 percent, an expected life of 5.0 years, and expected volatility of 162%, for 2003—an average risk-free rate of 3.5 percent, a dividend yield of 0 percent, an expected life of 5.0 years, and expected volatility of 197% and for 2004—an average risk-free rate of 4.0 percent, a dividend yield of 0 percent, an expected life of 5.0 years, and expected volatility of 151%. The weighted- average per share grant date fair value of Series H convertible preferred shares granted to employees in 2003 was $861.28 and $1,239.00 in 2004 and was determined using the trading price of the Company’s common stock on the date of grant. Each share of Series H preferred stock and options for Series H preferred stock converted into approximately 38 shares of common stock and options for approximately 38 shares of common stock in connection with the Equity Conversion.

Basic and Diluted Net Loss Per Common Share

Net income (loss) per share is presented in accordance with the provisions of SFAS No. 128 “Earnings per Share”. SFAS No. 128 requires a presentation of basic EPS and diluted EPS. Basic EPS excludes dilution for common stock equivalents and is computed by dividing income or loss available to common stockholders by the weighted-average number of common shares outstanding for the period, adjusted, using the if-converted method, for the effect of common stock equivalents arising from the assumed conversion of participating convertible securities, if dilutive. Diluted net loss per common share is based on the weighted- average number of shares of common stock outstanding during each period, adjusted for the effect of common stock equivalents arising from the assumed exercise of stock options, warrants, the conversion of preferred stock and conversion of participating convertible securities, if dilutive. Common

53

stock equivalents have been excluded from the net loss per share calculation for 2002 and 2004 because their effect would be anti-dilutive.

For the years ended December 31, 2002, and 2004, options to purchase 0.1 million and 1.1 million shares of common stock at weighted-average exercise prices of $88.20 and $2.30 per share, respectively, are not included in the computation of diluted earnings per share as they are anti-dilutive. For the years ended December 31, 2002 and 2004, preferred stock, which was convertible into 0.5 million and 31.6 million shares of common stock, respectively, was not included in the computation of diluted earnings per share as a result of its anti-dilutive effect. For the years ended December 31, 2002 and 2004, approximately 6,300 shares, of common stock issuable on the conversion of the Allied Riser convertible subordinated notes and warrants were not included in the computation of diluted earnings per share as a result of their anti-dilutive effect.

In March 2004, the FASB ratified the consensuses reached by Emerging Issues Task Force in Issue No. 03-06, Participating Securities and the Two-Class Method under FASB Statement No. 128 (“EITF 03-06”). EITF 03-06 clarifies the definitional issues surrounding participating securities and requires companies to restate prior earnings per share amounts for comparative purposes upon adoption. The Company adopted the provisions of EITF 03-06 in the second quarter of 2004, and restated its previously disclosed basic earnings per share amounts to include its participating securities in basic earnings per share when including such shares would have a dilutive effect. As a result of the adoption and for comparative purposes, basic income per share available to common shareholders decreased from $10.99 to $2.78 for the quarter ended March 31, 2003, from $271.84 to $12.64 for the quarter ended September 30, 2003, and from $229.18 to $11.18 for the year ended December 31, 2003.

The following details the determination of the diluted weighted average shares for the year ended December 31, 2003.

	Year Ended December 31, 2003
Weighted average common shares outstanding—basic		7,935,831
Dilutive effect of stock options		371
Dilutive effect of warrants		2,676
Weighted average shares—diluted		7,938,878

There is no effect on net income for the year ended December 31, 2003, caused by the conversion of any of the above securities included in the diluted weighted average shares calculation. The weighted average common shares outstanding for 2003 includes participating securities since 2003 had net income. These securities were excluded in 2002 and 2004 as they are anti-dilutive for these periods.

Recent Accounting Pronouncements

In December 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”). SFAS 123R requires all share-based payments to employees, including grants of stock options, to be recognized in the statement of operations based upon their fair values. The Company currently discloses the impact of valuing grants of stock options and recording the related compensation expense in a pro-forma footnote to its financial statements. Under SFAS 123R this alternative is no longer available. The Company will be required to adopt SFAS 123R on July 1, 2005 and as a result will record additional compensation expense in its statements of operations. The impact of the adoption of SFAS 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted SFAS 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net (loss) income in the notes to these consolidated financial statements. The Company is currently

54

evaluating the impact of the adoption of SFAS 123(R) on its financial position and results of operations, including the valuation methods and support for the assumptions that underlie the valuation of the awards.

Cash flows from financing activities

In connection with the acquisitions of Cogent Europe, Symposium Omega, UFO and Cogent Potomac, certain of the Company’s shareholders invested in the entities that were used by the Company to acquire the operating assets and liabilities of the businesses acquired. As a result, these amounts are included in cash flows from financing activities in the accompanying consolidated statement of cash flows for 2004.

2.   Acquisitions:

Since the Company’s inception, it has consummated several acquisitions through which it has generated revenue growth, expanded its network and customer base and added strategic assets to its business. These acquisitions were recorded in the accompanying financial statements under the purchase method of accounting. The operating results have been included in the consolidated statements of operations from the acquisition dates.

Verio Acquisition

In December 2004, the Company acquired most of the off-net Internet access customers of Verio Inc., (“Verio”) a leading global IP provider and subsidiary of NTT Communications Corp. The acquired assets included over 3,700 customer connections located in twenty-three U.S. markets, customer accounts receivable and certain network equipment. The Company assumed the liabilities associated with providing services to these customers including vendor relationships, accounts payable, customer contractual commitments and accrued liabilities. The Company is integrating these acquired assets into its operations and onto its network.

Aleron Broadband Services Acquisition and Merger with Cogent Potomac

In October 2004, the Company acquired certain assets of Aleron Broadband Services, formally known as AGIS Internet (“Aleron”), and $18.5 million in cash, in exchange for 3,700 shares of its Series M preferred stock. The acquisition was effected through a merger with Cogent Potomac. The Series M preferred stock was convertible into approximately 5.7 million sharesof the Company’s common stock and converted into common stock in connection with the Equity Conversion. The Company acquired Aleron’s customer base and network, as well as Aleron’s Internet access and managed modem service. The Company is integrating these acquired assets into its operations and onto its network.

Global Access Acquisition

In September 2004, the Company issued 185 shares of Series L preferred stock to the shareholders of Global Access Telecommunications, Inc. (“Global Access”) in exchange for the majority of the assets of Global Access. The Series L preferred stock was convertible into approximately 0.3 million sharesof the Company’s common stock and converted into common stock in connection with the Equity Conversion. The estimated fair market value for the Series L preferred stock was determined by using the price per share of our Series J preferred stock. Global Access was headquartered in Frankfurt, Germany and provided Internet access and other data services in Germany. The acquired assets included customer contracts, accounts receivable and certain network equipment. Assumed liabilities include certain vendor relationships and accounts payable and accrued liabilities. The Company has completed the integration of these acquired assets into its operations and onto its network.

55

Merger with UFO Group, Inc.

In August 2004, a subsidiary of the Company merged with UFO Group, Inc. (“UFO Group”). The Company issued 2,600 shares of Series K preferred stock in exchange for the outstanding shares of UFO Group. The Series K preferred stock was convertible into approximately 0.8 million sharesof the Company’s common stock and converted into common stock in connection with the Equity Conversion. The estimated fair market value for the Series K preferred stock was determined by using the price per share of our Series J preferred stock. Prior to the merger, UFO Group had acquired the majority of the assets of Unlimited Fiber Optics, Inc. (“UFO”). UFO’s customer base is comprised of data service customers and its network is comprised of fiber optic facilities located in San Francisco, Los Angeles and Chicago. The acquired assets included net cash of approximately $1.9 million, all of UFO’s customer contracts, customer accounts receivable and certain network equipment. Assumed liabilities include certain vendor relationships and accounts payable. The Company is in the process of integrating these acquired assets into its operations and onto its network and expects to complete this integration in the second quarter of 2005.

Merger with Symposium Omega

In March 2004, Symposium Omega, Inc., (“Omega”) a Delaware corporation and related party, merged with a subsidiary of the Company (Note 12). Prior to the merger, Omega had raised approximately $19.5 million in cash in a private equity transaction with certain existing investors in the Company and acquired the rights to a German fiber optic network. The German fiber optic network had no customers, employees or associated revenues. The Company issued 3,891 shares of Series J preferred stock to the shareholders of Omega in exchange for all of the outstanding common stock of Omega. The Series J preferred stock was convertible into approximately 6.0 million sharesof the Company’s common stock and converted into common stock in connection with the Equity Conversion. The accounting for the merger resulted in the Company recording cash of approximately $19.5 million and issuing Series J preferred stock. The German fiber optic network includes a pair of single mode fibers under a fifteen-year IRU, network equipment, and the co-location rights to facilities in approximately thirty-five points of presence in Germany. Approximately 1.5 million euro ($2.0 million) of the 2.2 million euro ($2.9 million) purchase price was paid through December 31, 2004 and the remaining 0.7 million euro payment ($0.9 million) was made in 2005.

Merger with Symposium Gamma, Inc. and Acquisition of Firstmark Communications Participations S.à r.l. and Subsidiaries (“Firstmark”)

In January 2004, a subsidiary of the Company merged with Symposium Gamma, Inc. (“Gamma”), a related party (Note 12). Immediately prior to the merger, Gamma had raised $2.5 million through the sale of its common stock in a private equity transaction with certain existing investors in the Company and new investors and in January 2004 acquired Firstmark for 1 euro. The merger expanded the Company’s network into Western Europe. Under the merger agreement all of the issued and outstanding shares of Gamma common stock were converted into 2,575 shares of the Company’s Series I preferred stock. The Series I preferred stock was convertible into approximately 0.8 million sharesof the Company’s common stock and converted into common stock in connection with the Equity Conversion. In 2004, Firstmark changed its name to Cogent Europe S.à r.l (“Cogent Europe”).

Fiber Network Services, Inc. Acquisition

On February 28, 2003, the Company purchased certain assets of Fiber Network Solutions, Inc. (“FNSI”) in exchange for the issuance of options for 6,000 shares of the Company’s common stock and the Company’s agreement to assume certain liabilities. The acquired assets include FNSI’s customer contracts

56

and accounts receivable. Assumed liabilities include certain of FNSI’s accounts payable, facilities leases, customer contractual commitments and note obligations.

PSINet, Inc. Acquisition

In April 2002, the Company acquired certain of PSINet’s assets and certain liabilities related to its operations in the United States for $9.5 million in cash in a sale conducted under Chapter 11 of the United States Bankruptcy Code. The acquired assets include certain of PSINet’s accounts receivable and intangible assets, including customer contracts, settlement-free peering rights and the PSINet trade name. Assumed liabilities include certain leased circuit commitments, facilities leases and customer contractual commitments. With the acquisition of PSINet assets the Company began to offer off-net Internet access service and acquired significant non-core services.

Merger—Allied Riser Communications Corporation

On February 4, 2002, the Company acquired Allied Riser Communications Corporation (“Allied Riser”). Allied Riser provided broadband data, voice and video communication services to small- and medium-sized businesses located in selected buildings in North America, including Canada. Upon the closing of the merger on February 4, 2002, Cogent issued approximately 0.1 million shares, to the existing Allied Riser stockholders and became a public company listed on the American Stock Exchange. The acquisition of Allied Riser provided the Company with in-building networks, pre-negotiated building access rights with building owners and real estate investment trusts across the United States and in Toronto, Canada and the operations of Shared Technologies of Canada (“STOC”). STOC provides voice and data services in Toronto, Canada. In 2004, STOC changed its name to Cogent Canada.

The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the respective acquisition dates (in thousands) for our material acquisitions.

	Allied Riser		PSINet		Cogent Europe
Current assets	$	71,502	$	4,842	$	17,374
Property, plant & equipment	—		294		55,862
Intangible assets	—		12,166		855
Other assets	3,289		—		4,145
Total assets acquired	$	74,791	$	17,302	$	78,236
Current liabilities	20,621		7,852		25,118
Long term debt	34,760		—		49,683
Other liabilities	—		—		860
Total liabilities assumed	55,381		7,852		75,661
Net assets acquired	$	19,410	$	9,450	$	2,575

The intangible assets acquired in the PSINet acquisition were allocated to customer contracts ($4.7 million), peering rights ($5.4 million), trade name ($1.8 million), and a non-compete agreement ($0.3 million). These intangible assets are being amortized in periods ranging from two to five years. The purchase price allocations for the UFO, Aleron, Global Access and Verio acquisitions are not finalized and could change if assumed liabilities result in amounts different than their estimated amounts.

The purchase price of Allied Riser was approximately $12.5 million and included the issuance of approximately 0.1 million shares of common stock valued at approximately $10.2 million, the issuance of warrants and options for the Company’s common stock valued at approximately $0.8 million and transaction expenses of approximately $1.5 million. The fair value of the common stock was determined by using the average closing price of Allied Risers’ common stock in accordance with SFAS No. 141. Allied

57

Riser’s subordinated convertible notes were recorded at their fair value using their quoted market price at the merger date. The fair value of assets acquired was approximately $110.9 million resulting in negative goodwill of approximately $43.0 million. Negative goodwill was allocated to long-lived assets of approximately $34.6 million with the remaining $8.4 million recorded as an extraordinary gain.

The merger with Cogent Europe was recorded in the accompanying financial statements under the purchase method of accounting. During the second quarter of 2004 the assumed liabilities were reduced by approximately $0.6 million as it was determined that an estimated assumed liability was not required to be paid resulting in an increase in negative goodwill resulting in a reduction of the long-lived asset balances. The purchase price of Cogent Europe was approximately $78.2 million, which includes the fair value of the Company’s Series I preferred stock of $2.6 million and assumed liabilities of $75.7 million. The fair value of assets acquired was approximately $155.5 million, which then gave rise to negative goodwill of approximately $77.3 million. Negative goodwill was allocated to long-lived assets, resulting in recorded assets acquired of $78.2 million.

If the Cogent Europe acquisition had taken place at the beginning of 2003, the unaudited pro forma combined results of the Company for the year ended December 31, 2003 would have been as follows (amounts in thousands, except per share amounts).

	Year Ended December 31, 2003
Revenue		$	85,952
Net income		218,269
Net income per share—basic		$	24.99
Net income per share—diluted		$	24.98

In management’s opinion, these unaudited pro forma amounts are not necessarily indicative of what the actual results of the combined operations might have been if the Cogent Europe acquisition had been effective at the beginning of 2003. Cogent Europe’s results for the year ended December 31, 2003 include non-recurring gains of approximately $135 million. Because Cogent Europe’s results for the period from January 1, 2004 to January 4, 2004 were not material, the pro forma combined results for the year ended December 31, 2004 are not presented. Pro forma amounts for the UFO Group, Global Access, Aleron and Verio acquisitions are not presented as these acquisitions did not exceed the materiality reporting thresholds. In management’s opinion, these unaudited pro forma amounts are not necessarily indicative of what the actual results of the combined operations might have been if the Cogent Europe acquisition had been effective at the beginning of 2003.

58

3.   Property and equipment and asset held for sale:

Property and equipment consisted of the following (in thousands):

	December 31,
	2003			2004
Owned assets:
Network equipment	$	186,204		$	221,480
Software	7,482			7,599
Office and other equipment	4,120			5,661
Leasehold improvements	50,387			59,296
Buildings	—			3,047
Land	—			374
System infrastructure	32,643			34,303
Construction in progress	988			131
	281,824			331,891
Less—Accumulated depreciation and amortization	(72,762		)	(116,682		)
	209,062			215,209
Assets under capital leases:
IRUs	118,273			143,214
Less—Accumulated depreciation and amortization	(12,929		)	(21,148		)
	105,344			122,066
Property and equipment, net	$	314,406		$	337,275

Depreciation and amortization expense related to property and equipment and capital leases was $26.6 million, $38.4 million and $48.3 million for the years ended December 31, 2002, 2003 and 2004, respectively.

Asset Held for Sale

The Company has finalized an agreement to sell a building and land it owns located in Lyon, France for net proceeds of 3.8 million euros ($5.1 million). These assets were acquired in the Cogent Europe acquisition. The associated net book value of $1.2 million is classified as “Asset Held for Sale” in the accompanying consolidated balance sheet (See Note 15).

Capitalized interest, labor and related costs

In 2002 and 2003, the Company capitalized interest of $0.8 million and $0.1 million, respectively. There was no capitalized interest in 2004. The Company capitalizes the salaries and related benefits of employees directly involved with its construction activities. The Company began capitalizing these costs in July 2000 and will continue to capitalize these costs while it is involved in construction activities. In 2002, 2003 and 2004, the Company capitalized salaries and related benefits of $4.8 million, $2.6 million and $1.7 million, respectively. These amounts are included in system infrastructure.

59

4.   Accrued liabilities and restructuring charge:

In July 2004, the French subsidiary of Cogent Europe re-located its Paris headquarters. The estimated net present value of the remaining lease obligation of the abandoned facility, net of estimated sub lease income, was approximately $1.4 million and was recorded as a restructuring charge in July 2004. In December 2004, management revised the estimated sub lease income which resulted in an additional restructuring charge of $0.4 million. A reconciliation of the amounts related to these contract termination costs is as follows (in thousands):

Restructuring accrual	2004
Beginning balance—	$	—
Charged to restructuring costs	1,821
Accretion	145
Amounts paid	(355		)
Ending balance	1,476
Current portion (recorded as accrued liabilities)	(1,229		)
Long term (recorded as other long term liabilities)	382

The Company provides for asset retirement obligations for certain points of presence in its networks. A reconciliation of the amounts related to these obligations as follows (in thousands):

Asset Retirment Obligations	2004
Beginning balance	$	—
Acquired balance—Cogent Europe	1,226
Accretion	40
Amounts paid	(64		)
Ending balance	1,202
Current portion (recorded as accrued liabilities)	(224		)
Long term (recorded as other long term liabilities)	$	978

Accrued liabilities as of December 31 consist of the following (in thousands):

	2003		2004
General operating expenditures	$	4,941	$	9,575
Restructuring accrual	—		1,229
Due to LNG—related party (Note 12)	—		217
Acquired lease accruals—Verio acquisition	—		1,832
Deferred revenue	486		1,940
Payroll and benefits	419		2,043
Taxes	1,584		1,004
Interest	455		3,968
Total	$	7,885	$	21,808

The current liabilities assumed in the Verio acquisition include $1.9 million for the present value of estimated net cash flows for amounts related to leases of abandoned facilities. No payments were made against these obligations in 2004.

60

5.   Intangible assets:

Intangible assets as of December 31 consist of the following (in thousands):

	2003			2004
Peering arrangements (weighted average life of 36 months)	$	16,440		$	16,440
Customer contracts (weighted average life of 21 months)	8,145			10,948
Trade name (weighted average life of 36 months)	1,764			1,764
Other (weighted average life of 24 months)	167			167
Non-compete agreements (weighted average life of 45 months)	431			431
Licenses (weighted average life of 60 months)	—			490
Total (weighted average life of 31 months)	26,947			30,240
Less—accumulated amortization	(18,671		)	(27,115		)
Intangible assets, net	$	8,276		$	3,125

Intangible assets are being amortized over periods ranging from 12 to 60 months. Amortization expense for the years ended December 31, 2002, 2003 and 2004 was approximately $7.4 million, $10.0 million and $8.3 million, respectively. Future amortization expense related to intangible assets is expected to be $2.8 million, $0.1 million, $0.1 million, and $0.1 million for the years ending December 31, 2005, 2006, 2007 and 2008, respectively.

6.   Other assets and liabilities:

Other long term assets as of December 31 consist of the following (in thousands):

	2003		2004
Prepaid expenses	$	378	$	255
Deposits	3,999		4,570
Total	$	4,377	$	4,825

Other long term liabilities as of December 31 consist of the following (in thousands):

	2003		2004
Deposits	$	636	$	264
Indemnification—LNG (Note 9)	167		167
Restructuring accrual	—		382
Asset retirement obligation	—		978
Other	—		25
Total	$	803	$	1,816

Warrant sale

In the Firstmark acquisition the Company obtained warrants to purchase ordinary shares of a company listed on the NASDAQ. The warrants were valued at the acquisition date at a fair market value of approximately $2.6 million under the Black-Scholes method of valuation. In January 2004, the Company exercised the warrants and sold the related securities for proceeds of approximately $3.5 million resulting in a gain of approximately $0.9 million. The gain is included as a component of interest and other income in the accompanying condensed consolidated financial statements.

61

7.   Long-term debt:

Troubled Debt Restructuring—Cisco Credit Facility

Prior to July 31, 2003, the Company was party to a $409 million credit facility with Cisco Systems Capital Corporation (“Cisco Capital”). On June 12, 2003, the Board of Directors approved a transaction with Cisco Systems, Inc. (“Cisco”) and Cisco Capital that restructured the Company’s indebtedness to Cisco Capital while at the same time selling Series G preferred stock to certain of the Company’s existing stockholders. The sale of Series G preferred stock was required to obtain the cash needed to complete the Cisco credit facility restructuring. On June 26, 2003, the Company’s stockholders approved these transactions. The Company entered into an agreement (the “Exchange Agreement”) with Cisco and Cisco Capital pursuant to which, among other things, Cisco and Cisco Capital agreed to cancel the principal amount of $262.8 million of indebtedness plus $6.3 million of accrued interest and return warrants exercisable for the purchase of common stock (the “Cisco Warrants”) in exchange for a cash payment by the Company of $20 million, the issuance of 11,000 shares of the Company’s Series F preferred stock, and the issuance of an amended and restated promissory note (the “Amended and Restated Cisco Note”) with an aggregate principal amount of $17.0 million under the modified credit facility (“Amended and Restated Credit Agreement”). This transaction has been accounted for as a troubled debt restructuring pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 15, “Accounting by Debtors and Creditors of Troubled Debt Restructurings”. Under SFAS No. 15, the Amended and Restated Cisco Note was recorded at its principal amount plus the total estimated future interest payments. The Company also entered into an agreement (the “Purchase Agreement”) with certain of the Company’s existing preferred stockholders (the “Investors”), pursuant to which the Company sold to the Investors in several sub-series, 41,030 shares of the Company’s Series G preferred stock for $41.0 million in cash. On July 31, 2003, the Company, Cisco Capital, Cisco and the Investors closed on the Exchange Agreement and the Purchase Agreement. The closing of these transactions resulted in the following:

Under the Purchase Agreement:

·The Company issued 41,030 shares of Series G preferred stock in several sub-series for gross cash proceeds of $41.0 million;

·The Company’s outstanding Series A, B, C, D and E preferred stock (“Existing Preferred Stock”) was converted into approximately 0.5 million shares of common stock. The conversion resulted in the elimination of the book values of these series of preferred stock and a corresponding increase to common stock based upon the common stock’s par value and an increase in additional paid in capital of $183.7 million.

Under the Exchange Agreement:

·The Company paid Cisco Capital $20.0 million in cash and issued to Cisco Capital 11,000 shares of Series F preferred stock;

·The Company issued to Cisco Capital the $17.0 million Amended and Restated Cisco Note;

·The default under the Cisco credit facility was eliminated;

·The amount outstanding under the Cisco credit facility including accrued interest was cancelled;

·The service provider agreement with Cisco was amended;

·The Cisco Warrants were cancelled.

62

The gain resulting from the retirement of the amounts outstanding under the credit facility under the Exchange Agreement was determined as follows (in thousands):

Cash paid	$	20,000
Issuance of Series F preferred stock	11,000
Amended and Restated Cisco Note, principal plus future interest payments	17,842
Transaction costs	1,167
Total consideration	50,009
Amount outstanding under the Cisco credit facility	(262,812		)
Interest accrued under the Cisco credit facility	(6,303		)
Book value of cancelled warrants	(8,248		)
Book value of unamortized Cisco credit facility loan costs	11,922
Gain—Cisco credit facility—troubled debt restructuring	$	(215,432	)

On a basic income and diluted income per share basis the gain was $27.14 for the year ended December 31, 2003.

Under the Amended and Restated Credit Agreement Cisco Capital’s obligation to make additional loans to the Company was terminated. Additionally the Amended and Restated Credit Agreement eliminated the Company’s financial performance covenants. Cisco Capital retained its senior security interest in substantially all of the Company’s assets, however, the Company may subordinate Cisco Capital’s security interest in the Company’s accounts receivable to another lender. The Amended and Restated Cisco Note was issued under the Amended and Restated Credit Agreement and is to be repaid in three installments. No interest is payable, nor does interest accrue on the Amended and Restated Cisco Note for the first 30 months, unless the Company defaults under the terms of the Amended and Restated Credit Agreement. Principal and interest is paid as follows: a $7.0 million principal payment is due in February 2006, a $5.0 million principal payment plus interest accrued is due in February 2007, and a final principal payment of $5.0 million plus interest accrued is due in February 2008. When the Amended and Restated Cisco Note accrues interest, interest accrues at the 90-day LIBOR rate plus 4.5%.

The Amended and Restated Cisco Note is subject to mandatory prepayment in full, without prepayment penalty, upon the occurrence of the closing of any change in control of the Company, the completion of any equity financing or receipt of loan proceeds in excess of $30.0 million, the achievement by the Company of four consecutive quarters of positive operating cash flow of at least $5.0 million, or the merger of the Company resulting in a combined entity with an equity value greater than $100.0 million, each of these events is defined in the agreement. The debt is subject to partial mandatory prepayment in an amount equal to the lesser of $2.0 million or the amount raised if the Company raises less than $30.0 million in a future equity financing.

Allied Riser convertible subordinated notes

On September 28, 2000, Allied Riser completed the issuance and sale in a private placement of an aggregate of $150.0 million in principal amount of its 7.50% convertible subordinated notes due September 15, 2007 (the “Notes”). At the closing of the merger between Allied Riser and the Company, approximately $117.0 million of the Notes were outstanding.

In January 2003, the Company, Allied Riser and the holders of approximately $106.7 million in face value of the Allied Riser notes entered into an exchange agreement and a settlement agreement. Pursuant to the exchange agreement, these note holders surrendered their notes, including accrued and unpaid interest, in exchange for a cash payment of approximately $5.0 million, 3.4 million shares of the Company’s Series D preferred stock and 3.4 million shares of the Company’s Series E preferred stock. Pursuant to the settlement agreement, these note holders dismissed their litigation with prejudice in exchange for the cash

63

payment. These transactions closed in March 2003 when the agreed amounts were paid and the Company issued the Series D and Series E preferred shares. The settlement and exchange transactions together eliminated $106.7 million in face amount of the notes due in June 2007, interest accrued on these notes since the December 15, 2002 interest payment, all future interest payment obligations on these notes and settled the litigation with note holders. As of December 31, 2002, the Company had accrued the amount payable under the settlement agreement, net of a recovery of $1.5 million under its insurance policy. This resulted in a net expense of $3.5 million recorded in 2002. The $4.9 million payment required under the settlement agreement was paid in March 2003. The Company received the $1.5 million insurance recovery in April 2003. The exchange agreement resulted in a gain of approximately $24.8 million recorded in March 2003. The gain resulted from the difference between the $36.5 million net book value of the notes ($106.7 face value less the related discount of $70.2 million) and $2.0 million of accrued interest and the exchange consideration which included $5.0 million in cash and the $8.5 million estimated fair market value for the Series D and Series E preferred stock less approximately $0.2 million of transaction costs. The estimated fair market value for the Series D and Series E preferred stock was determined by using the price per share of our Series C preferred stock, which represented the Company’s most recent equity transaction for cash.

The terms of the remaining $10.2 million of Notes were not impacted by these transactions and they continue to be due on June 15, 2007. These $10.2 million notes were recorded at their fair value of approximately $2.9 million at the merger date. The discount is accreted to interest expense through the maturity date. The Notes are convertible at the option of the holders into approximately 1,050 shares of the Company’s common stock. Interest is payable semiannually on June 15 and December 15, and is payable, at the election of the Company, in either cash or registered shares of the Company’s common stock. The Notes are redeemable at the Company’s option at any time on or after the third business day after June 15, 2004, at specified redemption prices plus accrued interest.

8.   Income taxes:

The net deferred tax asset is comprised of the following (in thousands):

	December 31
	2003			2004
Net operating loss carry-forwards	$	234,059		$	283,860
Depreciation	(23,627		)	(36,823		)
Start-up expenditures	3,724			3,379
Accrued liabilities	3,633			726
Deferred compensation	10,255			15,230
Other	28			16
Valuation allowance	(228,072		)	(266,388		)
Net deferred tax asset	$	—		$	—

Due to the uncertainty surrounding the realization of its net deferred tax asset, the Company has recorded a valuation allowance for the full amount of its net deferred tax asset. Should the Company achieve profitability, its deferred tax assets may be available to offset future income tax liabilities. The Company has combined net operating loss carry-forwards of approximately $788 million. The federal and state net operating loss carry-forwards for the United States of approximately $374 million expire in 2020 to 2024. The Company has net operating loss carryforwards related to its European operations of approximately $414 million, $52 million of which expire between 2005 and 2009 and $362 million of which do not expire. The federal and state net operating loss carry-forwards of Allied Riser Communications Corporation as of February 4, 2002 of approximately $183 million are subject to certain limitations on annual utilization due to the change in ownership as a result of the merger as defined by federal and state

64

tax laws. The Company’s net operating loss carry-forwards could be subject to certain limitations on annual utilization if certain changes in ownership were to occur as defined by the laws in the respective jurisdictions.

Under Section 108(a)(1)(B) of the Internal Revenue Code of 1986 gross income does not include amounts that would be includible in gross income by reason of the discharge of indebtedness to the extent that a non-bankrupt taxpayer is insolvent. Under Section 108(a)(1)(B) the Company believes that its gains on the settlement of debt with certain Allied Riser note holders and its debt restructuring with Cisco Capital for financial reporting purposes did not result in taxable income. However, these transactions resulted in a reduction to the Company’s net operating loss carry forwards of approximately $20 million in 2003 and resulted in further reductions to the Company’s net operating loss carry forwards of approximately $290 million in 2004.

The following is a reconciliation of the Federal statutory income tax rate to the effective rate reported in the financial statements.

	2002		2003		2004
Federal income tax (benefit) at statutory rates	34.0	%	34.0	%	34.0	%
State income tax (benefit) at statutory rates, net of Federal benefit	7.6		(3.7	)	6.6
Impact of foreign operations	—		—		(0.4	)
Impact of permanent differences	5.3		(53.0	)	0.1
Change in valuation allowance	(46.9	)	22.7		(40.3	)
Effective income tax rate	—	%	—	%	—	%

9.   Commitments and contingencies:

Capital leases—Fiber lease agreements

The Company has entered into lease agreements with several providers for intra-city and inter-city dark fiber primarily under 15-25 year IRUs certain of which include renewal options. These IRUs connect the Company’s international backbone fibers with the multi-tenant office buildings and the customers served by the Company. Once the Company has accepted the related fiber route, leases of intra-city and inter-city fiber-optic rings that meet the criteria for treatment as capital leases are recorded as a capital lease obligation and IRU asset. The future minimum commitments under these agreements are as follows (in thousands):

For the year ending December 31,
2005	$	15,938
2006	13,996
2007	13,606
2008	11,549
2009	11,568
Thereafter	102,639
Total minimum lease obligations	169,296
Less—amounts representing interest	(65,921		)
Present value of minimum lease obligations	103,375
Current maturities	(7,488		)
Capital lease obligations, net of current maturities	$	95,887

65

Capital lease obligation amendments

In 2004, the Company re-negotiated several lease obligations for its intra-city fiber in France and Spain. These transactions resulted gains of approximately $5.3 million recorded as gains on lease obligation restructurings in the accompanying statement of operations for the year ended December 31, 2004.

In March 2004, Cogent France paid approximately $0.3 million and settled amounts due from and due to a vendor. The vendor leased Cogent France its office facility and an intra-city IRU and was and continues to be a customer of Cogent France. The settlement agreement also restructured the IRU capital lease by reducing the 2.8 million euro ($3.6 million) January 2007 lease payment by 1.0 million euros ($1.3 million) and reducing the 2.5 million euro ($3.3 million) January 2008 lease payment by 1.0 million euros ($1.3 million). Under the settlement the lessor also agreed to purchase a minimum annual commitment of IP services from Cogent France. This transaction resulted in a reduction to the capital lease obligation and IRU asset of approximately $1.9 million.

In November 2004, Cogent Spain negotiated modifications to an IRU capital lease and note obligation with a vendor. In exchange for the return of one of two strands of leased optical fiber, Cogent Spain reduced its quarterly IRU lease payments, modified its payments and eliminated accrued and future interest on its note obligation. The note obligation arose in 2003, when Cogent Spain, then LambdaNet España S.A, negotiated a settlement with the vendor that included converting certain amounts due under the capital lease into a note obligation. The 8.3 million euro ($10.8 million) note obligation had a term of twelve years and bore interest at 5% with a two-year grace period and was repayable in forty equal installments. The first installment was due in 2005. The modified note is interest free and includes nineteen equal quarterly installments of 0.2 million euros ($0.3 million) and a final payment of 4.1 million euros ($5.3 million) due in January 2010. Cogent Spain paid 0.2 million euros ($0.3 million) at settlement. The modification to the note obligation resulted in a gain of approximately $0.3 million. The modification to the IRU capital lease resulted in a gain of approximately $4.9 million. The transaction resulted in a gain since the difference between the carrying value of the old IRU obligation and the net present value of the new IRU obligation was greater than the carrying value of the IRU asset. The IRU asset had been significantly reduced due to the allocation of negative goodwill to the long-lived assets of Cogent Europe in the acquisition.

Fiber Leases and Construction Commitments

One of the Company’s agreements for the leasing of metro fiber rings includes minimum specified commitments. The future minimum commitment under this arrangement is approximately $4.0 million.

Cisco equipment purchase commitment

In March 2000, the Company entered into a five-year agreement to purchase from Cisco minimum annual amounts of equipment, professional services, and software. In October 2001, the commitment was increased to purchase a minimum of $270 million through December 2004. As of July 31, 2003, the Company had purchased approximately $198.1 million towards this commitment and had met all of the minimum annual purchase commitment obligations. As part of the Company’s restructuring of the Cisco credit facility this agreement was amended. The amended agreement has no minimum purchase commitment but does have a requirement that the Company purchase Cisco equipment for its network equipment needs. No financing is provided and the Company is required to pay Cisco in advance for any purchases.

66

Current and Potential Litigation

In October 2004, the Company settled a dispute with a vendor over the amount invoiced by the vendor for telecommunications services. The settlement payment of $0.3 million was made in October 2004 and was less than the $1.0 million that had previously been recorded in accounts payable. As a result, approximately $0.7 million was recorded as a reduction to the cost of network operations in the third quarter of 2004.

The Company is also involved in a dispute over services provided by and to Lambdanet Germany during the time LambdaNet Germany was a sister company of the Company’s French and Spanish subsidiaries (Note 12). Cogent France and Cogent Spain are no longer sister companies of LambdaNet Germany. The Company intends to vigorously defend its position related to these charges and believes it has defenses and offsetting claims against LambdaNet Germany.

In 2003, a counterclaim was filed against the Company by a former employee in state court in California. The former employee asserted primarily that additional commissions were due to the employee. The Company had filed a claim against this employee for breach of contract among other claims. A judgment was awarded to the former employee and the Company has appealed this decision.

The Company has been made aware of several other companies in its own and in other industries that use the word “Cogent” in their corporate names. One company has informed the Company that it believes the Company’s use of the name “Cogent” infringes on its intellectual property rights in that name. If such a challenge is successful, the Company could be required to change its name and lose the goodwill associated with the Cogent name in its markets. Management does not believe such a challenge, if successful, would have a material impact on the Company’s business, financial condition or results of operations.

In December 2003 several former employees of the Company’s Spanish subsidiary filed claims related to their termination of employment. The Company intends to continue to vigorously defend its position related to these charges and feels that it has adequately reserved for the potential liability.

The Company is involved in other legal proceedings in the normal course of business which management does not believe will have a material impact on the Company’s financial condition.

Operating leases, maintenance and license agreements

The Company leases office space, network equipment sites, and facilities under operating leases. The Company also enters into building access agreements with the landlords of its targeted multi- tenant office buildings. The Company pays monthly fees for the maintenance of its intra-city and intercity leased fiber and in certain cases the Company connects its customers to its network under operating lease commitments for fiber. Future minimum annual commitments under these arrangements are as follows (in thousands):

2005	$	28,461
2006	24,264
2007	19,668
2008	16,944
2009	13,832
Thereafter	96,106
	$	199,275

Rent expense relates to leased office space and was $3.3 million in 2002, $2.3 million in 2003 and $7.0 million in 2004. The Company has subleased certain office space and facilities. Future minimum payments

67

under these sub lease agreements are approximately $1.2 million, $0.8 million, $0.4 million and $0.2 million for the years ending December 31, 2005 through December 31, 2008, respectively.

Shareholder Indemnification

In November 2003 the Company’s Chief Executive Officer acquired LNG Holdings S.A. (“LNG”). LNG, through its LambdaNet group of subsidiaries, operated a carriers’ carrier fiber optic transport business in Europe. In connection with this transaction, the Company provided an indemnification to certain former LNG shareholders. The Company provided the indemnification in connection with its plan to acquire certain subsidiaries of LNG (Note 12). The guarantee is without expiration and covers claims related to LNG’s LambdaNet subsidiaries and actions taken in respect thereof including actions related to the transfer of ownership interests in LNG. Should the Company be required to perform the Company will defend the action and may attempt to recover from LNG and other involved entities. The Company has recorded a long-term liability of approximately $0.2 million for the estimated fair value of this obligation.

10.   Stockholders’ equity:

In June 2003, the Company’s board of directors and shareholders approved an amended and restated charter that eliminated the reference to the Company’s Series A, B, C, D, and E preferred stock (“Existing Preferred Stock”). In March 2005, the Company’s board of directors and shareholders approved an amended and restated charter that increased the number of authorized shares of the Company’s common stock to 75.0 million shares and designated 10,000 shares of undesignated preferred stock.

On July 31, 2003 and in connection with the Company’s restructuring of its debt with Cisco Capital, all of the Company’s Existing Preferred Stock was converted into approximately 0.5 million shares of common stock. At the same time the Company issued 11,000 shares of Series F preferred stock to Cisco Capital under the Exchange Agreement and issued 41,030 shares of Series G preferred stock for gross proceeds of $41.0 million to the Investors under the Purchase Agreement.

In January 2004, Gamma merged with a subsidiary of the Company. Under the merger agreement, all of the issued and outstanding shares of Gamma common stock were converted into 2,575 shares of the Company’s Series I preferred stock and the Company became Gamma and Cogent Europe’s sole shareholder.

On March 30, 2004, Omega merged with a subsidiary of the Company. Prior to the merger Omega had raised approximately $19.5 million in cash and acquired the rights to acquire a German fiber optic network. The Company issued 3,891 shares of Series J preferred stock to the shareholders of Omega in exchange for all of the outstanding common stock of Omega.

On August 12, 2004, UFO Group merged with a subsidiary of the Company. Prior to the merger UFO Group had raised net cash of approximately $2.1 million and acquired the rights to acquire the majority of the assets of Unlimited Fiber Optics, Inc. The Company issued 2,600 shares of Series K preferred stock to the shareholders of UFO Group in exchange for all of the outstanding common stock of UFO Group.

On September 15, 2004, the Company issued 185 shares of Series L preferred stock to the shareholders of Global Access in exchange for the majority of the assets of Global Access.

On October 26, 2004, the Company merged with Potomac. The Company issued 3,700 shares of Series M preferred stock in exchange for all of the outstanding common shares of Potomac. Prior to the merger, Potomac had acquired the majority of the assets of Aleron.

Each share of the Series F preferred stock, Series G preferred stock, Series H preferred stock, Series I preferred stock, Series J preferred stock, Series K preferred stock, Series L preferred stock and Series M preferred stock (collectively, the “New Preferred”) may be converted into shares of common stock at the

68

election of its holder at any time. The Series F, Series G, Series I, Series J, Series K, Series L and Series M preferred stock were convertible into 3.4 million, 12.7 million, 0.8 million, 6.0 million, 0.8 million, 0.3 million and 5.7 million shares of the Company’s common stock, respectively. In March 2005, the New Preferred was converted into voting common stock. In connection with the Equity Conversion, the liquidation preferences on the New Preferred were also eliminated.

Warrants and options

Warrants to purchase shares of the Company’s common stock were issued to Cisco Capital in connection with working capital loans under the Company’s credit facility. On July 31, 2003 these warrants were cancelled as part of the restructuring of the Company’s debt to Cisco Capital.

In connection with the February 2002 merger with Allied Riser, the Company assumed warrants issued by Allied Riser that convert into approximately 5,000 shares of the Company’s common stock. All warrants are exercisable at exercise prices ranging from $0 to $9,500 per share. These warrants were valued at approximately $0.8 million using the Black-Scholes method of valuation and are recorded as stock purchase warrants using the following assumptions—average risk free rate of 4.7 percent, an estimated fair value of the Company’s common stock of $5.32, expected live of 8 years and expected volatility of 207.3%.

In connection with the February 2003 purchase of certain assets of FNSI options for 6,000 shares of common stock at $9.00 per share were issued to certain former FNSI vendors. The fair value of these options was estimated at $52,000 at the date of grant with the following weighted-average assumptions—an average risk-free rate of 3.5 percent, a dividend yield of 0 percent, an expected life of 10.0 years, and expected volatility of 128%.

Dividends

The Cisco credit facility and the Company’s line of credit prohibit the Company from paying cash dividends and restricts the Company’s ability to make other distributions to its stockholders.

Beneficial Conversion Charges

Beneficial conversion charges of $2.5 million, $19.5 million, $2.6 million, $0.9 million and $18.5 million were recorded on January 5, 2004, March 30, 2004, August 12, 2004, September 15, 2004, and October 26, 2004 respectively, since the price per common share at which the Series I, Series J, Series K, Series L and Series M preferred stock converts into were less than the quoted trading price of the Company’s common stock on that date.

69

11.   Stock option plans:

Equity Incentive Plan

In 1999, the Company adopted its Equity Incentive Plan (the “Plan”) for granting of options to employees, directors, and consultants under which 74,500 shares of common stock are reserved for issuance. Options granted under the Plan may be designated as incentive or nonqualified at the discretion of the Plan administrator. Stock options granted under the Plan generally vest over a four-year period and have a term of ten years. Stock options exercised, granted, and canceled during the period from December 31, 2001 to December 31, 2004, were as follows:

	Number of options			Weighted-average exercise price
Outstanding at December 31, 2001		57,896			$	106.00
Granted		7,694			$	38.60
Exercised		(365	)		$	2.60
Cancellations		(13,561	)		$	138.80
Outstanding at December 31, 2002		51,664			$	88.20
Granted		7,859			$	9.80
Exercised		—			$	—
Cancellations		(53,443	)		$	85.60
Outstanding at December 31, 2003		6,080			$	9.03
Granted		—			$	—
Exercised		—			$	—
Cancellations		(5	)		$	40.00
Outstanding at December 31, 2004		6,075			$	9.00

Options exercisable under the Plan as of December 31, 2002, were 25,342 with a weighted-average exercise price of $95.60. Options exercisable as of December 31, 2003, were 6,002 with a weighted-average exercise price of $9.03. Options exercisable as of December 31, 2004, were 6,033 with a weighted-average exercise price of $9.00. The weighted-average remaining contractual life of the outstanding options at December 31, 2004, was approximately 8.2 years.

OUTSTANDING AND EXERCISABLE BY PRICE RANGE—2000 PLAN
As of December 31, 2004

Range of Exercise Prices	Number Outstanding 12/31/2004		Weighted Average Remaining Contractual Life (years)		Weighted-Average Exercise Price			Number Exercisable As of 12/31/2004		Weighted-Average Exercise Price
$9.00		6,075		8.16		$	9.00		6,033		$	9.00

Offer to exchange—Series H Preferred Stock and 2003 and 2004 Incentive Award Plans (“2004 Plan”)

In September 2003, the Compensation Committee (the “Committee”) of the board of directors adopted and the stockholders approved, the Company’s 2003 Incentive Award Plan (the “Award Plan”). The Award Plan reserved 54,001 shares of Series H preferred stock for issuance under the Award Plan. In September 2003, the Company offered its employees the opportunity to exchange eligible outstanding stock options and certain common stock for restricted shares of Series H preferred stock under the Award Plan. In 2004, the Company’s board of directors and shareholders approved the Company’s 2004 Incentive Award Plan that increased the shares of Series H preferred stock available for grant as either restricted shares or options for restricted shares under the Award Plan from 54,001 to 84,001 shares. In July 2004, the

70

Company began granting options for Series H preferred stock. Each share of Series H preferred stock and each option for Series H preferred stock was convertible into approximately 38 shares of common stock and were converted in connection with the Equity Conversion. The Series H preferred shares were valued using the trading price of the Company’s common stock on the grant date. For restricted shares granted under the offer to exchange, the vesting period was 27% upon grant with the remaining shares vesting ratably over a three year period and for share and options grants to newly hired employees; the shares generally vest 25% after one year with the remaining shares vesting ratably over three years. Compensation expense is recognized ratably over the service period.

Stock options for Series H preferred stock exercised, granted, and canceled under the 2004 Plan during the year ended December 31, 2004, were as follows:

	Number of Options			Weighted-average exercise price
Outstanding at December 31, 2003		—			$	—
Granted		27,499			$	87.24
Cancellations		(61	)		$	237.20
Outstanding at December 31, 2004		27,438			$	230.77

OUTSTANDING AND EXERCISABLE BY PRICE RANGE—2004 PLAN
As of December 31, 2004

Range of Exercise Prices	Number Outstanding 12/31/2004		Weighted Average Remaining Contractual Life (years)		Weighted-Average Exercise Price			Number Exercisable As of  12/31/2004		Weighted-Average Exercise Price
$0.01 (granted below market value)		17,500		9.69		$	0.01		—		$	—
$192.31 to $361.54		9,812		9.51		$	231.63		877		$	230.77
$569.23 to $1,230.77		126		9.93		$	569.23		—		$	—
$0.01 to $1,230.77		27,438		9.63		$	86.91		877		$	230.77

Shares of Series H preferred stock granted, converted into common stock and canceled under the 2003 and 2004 Plan during the years ended December 31, 2003 and December 31, 2004, were as follows:

	Number of Shares
Outstanding at December 31, 2002		—
Granted (weighted average fair value of $861.28)		53,873
Converted into common stock		—
Cancellations		(500	)
Outstanding at December 31, 2003		53,373
Granted (weighted average fair value of $1,239.00)		1,913
Converted into 166,844 shares of common stock		(4,338	)
Cancellations		(5,127	)
Outstanding at December 31, 2004		45,821

71

Vested shares do not expire and were 25,833 as of December 31, 2004.

Deferred Compensation Charges—Stock Options and Restricted Stock

The Company recorded a deferred compensation charge of approximately $14.3 million in the fourth quarter of 2001 related to options granted at exercise prices below the estimated fair market value of the Company’s common stock on the date of grant. The deferred compensation charge was amortized over the service period of the related options which was generally four years. In connection with the October 2003 offer to exchange and granting of Series H preferred stock the remaining $3.2 million unamortized balance of deferred compensation is now amortized over the vesting period of the Series H preferred stock.

In July 2004, the Company began granting options for Series H preferred stock, 17,500 of which were granted with an exercise price below the trading price of the Company’s common stock on grant date. These option grants resulted in additional deferred compensation of $4.7 million recorded during the third quarter of 2004. Deferred compensation for these option grants was determined by multiplying the difference between the exercise price and the market value of the Series H preferred stock on grant date times the number of options granted and is being amortized over the service period.

Under the offer to exchange, the Company recorded a deferred compensation charge of approximately $46.1 million in the fourth quarter of 2003. The Company has also granted additional shares of Series H preferred to its new employees resulting in an additional deferred compensation. For grants of restricted stock, when an employee terminates prior to full vesting, the total remaining deferred compensation charge is reduced, the employee retains their vested shares and the employees’ unvested shares are returned to the plan. For grants of options for restricted stock, when an employee terminates prior to full vesting, the total remaining deferred compensation charge is reduced, previously recorded deferred compensation is reversed and the employee may elect to exercise their vested options for a period of ninety days and any of the employees’ unvested options are returned to the plan. Deferred compensation for the granting of Series H preferred restricted shares was determined using the trading price of the Company’s common stock on the grant date.

The amortization of deferred compensation expense related to stock options and restricted stock was approximately $3.3 million for the year ended December 31, 2002, $18.7 million for the year ended December 31, 2003 and $12.3 million for the year ended December 31, 2004.

12.   Related party transactions:

Office lease

The Company’s headquarters is located in an office building owned by an entity controlled by the Company’s Chief Executive Officer. The Company paid $410,000 in 2002, $367,000 in 2003 and $409,000 in 2004 in rent to this entity. The lease expires in August 2006.

LNG Holdings S.A (“LNG”)

In November 2003, approximately 90% of the stock of LNG, the then parent company to Firstmark, now named Cogent Europe, was acquired by Symposium Inc. (“Symposium”) a Delaware corporation. The acquisition was for no consideration and in return for a commitment to cause at least $2 million to be invested in LNG’s subsidiary LambdaNet France and an indemnification of LNG’s selling stockholders by the Company and Symposium. Symposium is wholly owned by the Company’s Chief Executive Officer. In January 2004, LNG transferred its interest in Firstmark to Symposium Gamma, Inc. (“Gamma”), a Delaware corporation, in return for $1 and a commitment by Gamma to invest at least $2 million in the operations of Firstmark’s French subsidiary—now called Cogent France. Prior to the transfer, Gamma had raised approximately $2.5 million in a private equity transaction with certain existing investors in the

72

Company and new investors. In January 2004, Gamma transferred $2.5 million to Cogent France and, by so doing, fulfilled the $2.0 million commitment. Symposium continues to own approximately 90% of the stock of LNG. LNG operates as a holding company. Its subsidiaries hold assets related to their former telecommunications operations. In connection with this transaction the Company provided an indemnification to certain former LNG shareholders.

In January 2004, 215.1 million euros ($279.6 million) of Firstmark’s total debt of 216.1 million euros ($280.9 million) owed to its previous parent LNG, and other amounts payable of 4.9 million euros ($6.4 million) owed to LNG were assigned to Symposium Gamma, Inc. (“Gamma”) at their fair market value of 1 euro in connection with Gamma’s acquisition of Firstmark. Prior to the Company’s merger with Gamma, and advanced as part of the Gamma merger, LNG transferred 1.0 million euros ($1.3 million) to Cogent France. Cogent France repaid the 1.0 million euros ($1.3 million) to LNG in March 2004. Accordingly, 215.1 million euros ($279.6 million) of the total 216.1 million euros ($280.9 million) of the debt obligation and 4.9 million euros ($6.4 million) of the other amounts payable eliminate in the consolidation of these financial statements.

Gamma and Omega

Gamma and Omega are considered related parties to the Company since both entities had raised cash in private equity transactions with certain existing investors in the Company. Gamma was formed in order to acquire Firstmark. Omega was formed in order to acquire the rights to the German fiber optic network that was acquired by the Company in 2004. In December 2003, Gamma was capitalized with approximately $2.5 million in exchange for 100% of Gamma’s common stock. In March 2004, Omega was capitalized with approximately $19.5 million in exchange for 100% of Omega’s common stock.

In 2004, Cogent Europe’s subsidiaries provided network services to and in turn utilized the network of LambdaNet Communications AG (“Lambdanet Germany”) in order for each entity to provide services to certain of their customers under a network sharing agreement. Lambdanet Germany was a majority owned subsidiary of LNG from November 2003 until April 2004 when Lambdanet Germany was sold to an unrelated party. During the year ended December 31, 2004 Cogent Europe recorded revenue of $2.0 million from Lambdanet Germany and network costs of $1.8 million under the network sharing agreement. As of December 31, 2004 and for 2004, Cogent Europe had recorded net amounts due from Lambdanet Germany of $2.0 million and net amounts due to Lambdanet Germany of $2.0 million. The Company is currently in negotiations with the new owner of Lambdanet Germany over the terms of settling these amounts.

Marketing and Service Agreement

The Company has entered into an agency sales and mutual marketing agreement with CTC Communications Corp., a company owned indirectly by one of the Company’s directors. CTC is also a customer and the Company recorded approximately $70,000 of revenue from CTC for the year ended December 31, 2004.

Customer Agreement with Cisco Systems Capital Corporation

In connection with the UFO acquisition we acquired Cisco as a customer. Cisco is a company stockholder and lender. The Company recorded revenue from Cisco of approximately $160,000 for the year ended December 31, 2004.

Vendor Settlement—-Nortel

In 2004 the Company participated with LNG in the settlement of various disputes with Nortel Networks UK Limited and Nortel Networks France SAS, or Nortel. The dispute was regarding payments

73

owed by Cogent France and LNG as well as disputes over ongoing maintenance and software licensing for Nortel equipment deployed in the Company’s European operations.

In connection with the settlement, the Company committed to pay approximately 0.5 million euros ($0.6 million) as settlement in full of all amounts owed to Nortel through June 30, 2004. In addition, the Company committed to pay approximately 0.6 million euros ($0.8 million) for equipment maintenance services to be delivered by Nortel during the second half of 2004 and to enter into a new services agreement to extend certain maintenance and other services arrangements with Nortel through 2007. Under the terms of the settlement, if the Company terminates the agreement before the end of 2007 without cause, the Company would be required to pay a penalty of 1.0 million euros ($1.3 million) The settlement also included a commitment to pay 0.5 million euros ($0.7 million) over three years for right-to-use software licenses for certain Nortel equipment.

Vendor Settlemen— Iberbanda

Cogent Spain and LNG settled a number of disputes between those entities and Iberbanda, a Spanish entity from whom Cogent Spain had been leasing space and obtaining services. In the settlement, LNG released to Iberbanda a 0.3 million euro ($0.4 million) bond that had been put in place by LNG with the Spanish government as part of a bid for the right to construct a wireless network. In consideration for LNG’s release of the bond, Iberbanda settled a claim for approximately 0.7 million euros ($0.9 million) of back rent due and service charges. The rent related to the former Madrid offices of Cogent Spain. In addition, Cogent Spain granted a credit for services to Iberbanda in the amount of 0.2 million euros ($0.3 million) and agreed to pay approximately 80,000 euros ($104,000) in cash over a period of 18 months. LNG’s release of the 0.3 million euros ($0.4 million) euro bond has been recorded as a contribution of capital from a shareholder as a result of the Company’s Chief Executive Officer’s ownership of LNG.

Reimbursement for Services Provided by LNG Employees

In January 2005, the Company reimbursed LNG approximately 40,000 euros ($52,000) of the approximate 190,000 euros ($269,000) for salaries paid to two employees of LNG that were providing Cogent Europe accounting and management services during 2004. In November 2004, these two employees became employees of Cogent Europe. The remaining 150,000 euros ($217,000) is reflected in accrued liabilities on the accompanying December 31, 2004 balance sheet.

13.   Quarterly financial information (unaudited):

	Three months ended
	March 31, 2003			June 30, 2003			September 30, 2003			December 31, 2003
	(in thousands, except share and per share amounts)
Net service revenue	$	14,233		$	15,519		$	15,148			$	14,522
Cost of network operations, including amortization of deferred compensation	10,739			12,282			12,067				13,236
Operating loss	(14,880		)	(16,568		)	(15,901		)		(33,878		)
Gain—Cisco credit facility—troubled debt restructuring	—			—			215,432				—
Gain—Allied Riser note exchange	24,802			—			—				—
Net (loss) income	1,914			(22,796		)	196,462				(34,837		)
Net (loss) income applicable to common stock	1,914			(22,796		)	144,462				(34,837		)
Net (loss) income per common share—basic	2.78			(130.80		)	12.64				(52.77		)
Net (loss) income per common share—diluted	2.58			(130.80		)	12.64				(52.77		)
Weighted-average number of shares outstanding—basic	688,233			174,192			11,426,017				660,229
Weighted-average number of shares outstanding— diluted	692,257			174,192			11,429,777				660,229

74

	Three months ended
	March 31, 2004			June 30, 2004			September 30, 2004				December 31, 2004
	(in thousands, except share and per share amounts)
Net service revenue	$	20,945		$	20,387			$	21,736			$	28,218
Cost of network operations, including amortization of deferred compensation	15,947			13,486				14,510				20,381
Operating loss	(21,939		)	(19,218		)		(20,160		)		(22,752		)
Gains—lease obligations restructuring	—			—				—				5,292
Net loss	(24,170		)	(22,225		)		(23,041		)		(20,224		)
Net loss applicable to common stock	(46,198		)	(22,225		)		(26,496		)		(38,727		)
Net loss income per common share—basic	(35.94		)	(29.51		)		(28.58		)		(24.66		)
Net loss income per common share—diluted	(35.94		)	(29.51		)		(28.58		)		(24.66		)
Weighted-average number of shares outstanding—basic	672,457			753,130				806,151				820,125
Weighted-average number of shares outstanding— diluted	672,457			753,130				806,151				820,125

The net losses applicable to common stock for the third quarter of 2003, first quarter of 2004, third quarter of 2004 and fourth quarter of 2004 include non-cash beneficial conversion charges of $52.0 million, $22.0 million, $3.5 million and $18.5 million, respectively.

14.   Segment information:

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company operates as one operating segment. Below are the Company’s net revenues and long lived assets by geographic theater (in thousands):

	Year Ended December 31, 2004
Net Revenues
North America		$	68,009
Europe		23,277
Total		$	91,286

	December 31, 2004
Long lived assets, net
North America		$	287,204
Europe		54,416
Total		$	341,620

15.   Subsequent events:

Subordinated Note

On February 24, 2005, the Company issued a subordinated note in the principal amount of $10.0 million to Columbia Ventures Corporation, a stockholder, in exchange for $10.0 million in cash. The note was issued pursuant to a Note Purchase Agreement dated February 24, 2005. The note has an initial interest rate of 10% per annum and the interest rate increases by one percent on August 24, 2005, six months after the note was issued, and by a further one percent at the end of each successive six-month period up to a maximum of 17%. Interest on the note accrues and is payable on the note’s maturity date of February 24, 2009. The Company may prepay the note in whole or in part at any time. The terms of the

75

note require the payment of all principal and accrued interest upon the occurrence of a liquidity event, which is defined as an equity offering of at least $30 million in net proceeds. The note is subordinated to the debt evidenced by the Amended and Restated Cisco Note, as well as our accounts receivable line of credit obtained in March 2005. Management believes that the terms of the note are at least as favorable as those the Company would have been able to obtain from an unaffiliated third party.

Line of Credit

In March 2005, the Company entered into a line of credit with a commercial bank. The line of credit provides for borrowings of up to $10.0 million and is secured by our accounts receivable. The borrowing base is determined primarily by the aging characteristics related to our accounts receivable. On March 18, 2005, we borrowed $10.0 million against our North American accounts receivable. Of this amount $4.0 million is restricted and held by the lender. The line of credit matures on January 31, 2007. Borrowings under the line of credit accrue interest at the prime rate plus 1.5% and may, in certain circumstances, be reduced to the prime rate plus 0.5%. The Company’s obligations under the line of credit are secured by a first priority lien in certain of our accounts receivable and are guaranteed by the Company’s material domestic subsidiaries, as defined. The agreements governing the line of credit contain certain customary representations and warranties, covenants, notice provisions and events of default.

Building Sale

On March 30, 2005, we sold a building we owned located in Lyon, France for net proceeds of 3.8 million euros ($5.1 million). This transaction resulted in a gain of approximately 2.9 million euros ($3.9 million).

76

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), an evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our management, including our principal executive officer and our principal financial officer, concluded that the design and operation of these disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B.OTHER INFORMATION

Not applicable.

77

PART III

ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item 10 is incorporated in this report by reference to the information set forth in the 2004 Definitive Information Statement for the 2004 Annual Meeting of Stockholders, which is expected to be filed with the Commission within 120 days after the close of our fiscal year.

ITEM 11.EXECUTIVE COMPENSATION

The information required by this Item 11 is incorporated in this report by reference to the information set forth under the caption “Executive Officers Compensation” in the 2004 Definitive Information Statement.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item 12 is incorporated in this report by reference to the information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the 2004 Definitive Information Statement.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item 13 is incorporated in this report by reference to the information set forth under the caption “Certain Transactions” in the 2004 Definitive Information Statement.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 is incorporated in this report by reference to the information set forth under the caption “Principal Accountant Fees and Services” in the 2004 Definitive Information Statement.

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	1.	Financial Statements. A list of financial statements included herein is set forth in the Index to Financial Statements appearing in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.”
	2.	Financial Statement Schedules. The Financial Statement Schedules described below are filed as part of the report.
		Description
		Schedule I—Condensed Financial Information of Registrant (Parent Company Information) Schedule II—Valuation and Qualifying Accounts.
		All other financial statement schedules are not required under the relevant instructions or are inapplicable and therefore have been omitted.

78

(b) Exhibits.

Exhibit	Description
2.1	Agreement and Plan of Merger, dated as of August 28, 2001, by and among Cogent, Allied Riser and the merger subsidiary (incorporated by reference to Appendix A to our Registration Statement on Form S-4, Commission File No. 333-71684, filed on October 16, 2001)
2.2	Amendment No. 1 to the Agreement and Plan of Merger, dated as of October 13, 2001, by and among Cogent, Allied Riser and the merger subsidiary (incorporated by reference to Appendix B to our Registration Statement on Form S-4, Commission File No. 333-71684, filed on October 16, 2001)
2.3	Asset Purchase Agreement, dated February 26, 2002, by and among Cogent Communications Group, Inc., PSINet, Inc. et al. (previously filed as Exhibit 2.1 to our Current Report on Form 8-K, dated February 26, 2002, and incorporated herein by reference)
2.4	Agreement and Plan of Merger, dated as of January 2, 2004, among Cogent Communications Group, Inc., Lux Merger Sub, Inc. and Symposium Gamma, Inc., filed as Exhibit 2.1 to our Periodic Report on Form 8-K, filed on January 8, 2004, and incorporated herein by reference.
2.5	Agreement and Plan of Merger, dated as of March 30, 2004, among Cogent Communications Group, Inc., DE Merger Sub, Inc. and Symposium Omega, Inc. (incorporated by reference to Exhibits 2.6 of our Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 30, 2004)
2.6	Agreement and Plan of Merger, dated as of August 12, 2004, among Cogent Communications Group, Inc., Marvin Internet, Inc., and UFO Group, Inc. (filed herewith)
2.7	Asset Purchase Agreement, dated as of September 15, 2004, between Global Access telecommunications Inc., Symposium Gamma, Inc. and Cogent Communications Group, Inc. (filed herewith)
2.8	Agreement and Plan of Merger, dated as of October 26, 2004, among Cogent Communications Group, Inc., Cogent Potomac, Inc. and NVA Acquisition, Inc. (filed herewith)
2.9	Agreement for the Purchase and Sale of Assets, dated December 1, 2004, among Cogent Communications Group, Inc., SFX Acquisition, Inc. and Verio Inc. (filed herewith)
3.1	Form of Fifth Amended and Restated Certificate of Incorporation (filed herewith)
3.2	Amended Bylaws of Cogent Communications Group, Inc. (incorporated by reference to Exhibit 3.6 of our Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 30, 2004)
4.1	First Supplemental Indenture, among Allied Riser Communications Corporation, as issuer, Cogent Communications Group, Inc., as co-obligor, and Wilmington Trust Company, as trustee (incorporated by reference to Exhibit 4.4 to our Registration Statement on Form S-4, as amended by a Form POS AM (Post-Effective Amendment No. 2), Commission File No. 333-71684, filed February 4, 2002)
4.2	Indenture, dated as of July 28, 2000 by and between Allied Riser Communications Corporation and Wilmington Trust Company, as trustee, relating to Allied Riser’s 7.50% Convertible Subordinated Notes due 2007 (incorporated by reference to Exhibit 4.5 to our Registration Statement on Form S-4, as amended by a Form POS AM (Post-Effective Amendment No. 1), Commission File No. 333-71684, filed January 25, 2002)
10.1	Sixth Amended and Restated Stockholders Agreement of Cogent Communications Group, Inc., dated as of February 9, 2005 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 11, 2005)
10.2	Seventh Amended and Restated Registration Rights Agreement of Cogent Communications Group, Inc., dated August 12, 2004 (filed herewith)

79

10.3	Exchange Agreement, dated as of June 26, 2003, by and among Cogent Communications Group, Inc., Cogent Communications, Inc., Cogent Internet, Inc., Cisco Systems, Inc. and Cisco Systems Capital Corporation, (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on August 7, 2003)
10.4	Third Amended and Restated Credit Agreement, dated as of July 31, 2003, by and among Cogent Communications, Inc., Cogent Internet, Inc., Cisco Systems Capital Corporation, and the other Lenders party thereto (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed on August 14, 2003)
10.5	Settlement Agreement, dated as of March 6, 2003, between Cogent Communications Group, Inc., Allied Riser Communications Corporation and the several noteholders named therein (incorporated by reference to 10.7 to our Annual Report on Form 10-K filed on March 31, 2003)
10.6	Exchange Agreement, dated as of March 6, 2003, between Cogent Communications Group, Inc., Allied Riser Communications Corporation and the several noteholders named therein (incorporated by reference to 10.8 to our Annual Report on Form 10-K filed on March 31, 2003)
10.7	Closing Date Agreement, dated as of March 6, 2003, between Cogent Communications Group, Inc., Allied Riser Communications Corporation and the several noteholders named therein (incorporated by reference to 10.17 to our Annual Report on Form 10-K filed on March 31, 2003)
10.8	General Release, dated as of March 6, 2003, Cogent Communications Group, Inc., Allied Riser Communications Corporation and the several noteholders named therein (incorporated by reference to 10.18 to our Annual Report on Form 10-K filed on March 31, 2003)
10.9	Fiber Optic Network Leased Fiber Agreement, dated February 7, 2000, by and between Cogent Communications, Inc. and Metromedia Fiber Network Services, Inc., as amended July 19, 2001 (incorporated by reference to Exhibit 10.1 to our Registration Statement on Form S-4, Commission File No. 333-71684, filed on October 16, 2001) *
10.10	Dark Fiber IRU Agreement, dated April 14, 2000, between WilTel Communications, Inc. and Cogent Communications, Inc., as amended June 27, 2000, December 11, 2000, January 26, 2001, and February 21, 2001 (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form S-4, Commission File No. 333-71684, filed on October 16, 2001) *
10.11	David Schaeffer Employment Agreement with Cogent Communications Group, Inc., dated February 7, 2000 (incorporated by reference to Exhibit 10.6 to our Registration Statement on Form S-4, Commission File No. 333-71684, filed on October 16, 2001)
10.12	Form of Restricted Stock Agreement relating to Series H Participating Convertible Preferred Stock (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form S-8, Commission File No. 333-108702, filed on September 11, 2003)
10.13	Lease for Headquarters Space by and between 6715 Kenilworth Avenue Partnership and Cogent Communications Group, Inc., dated September 1, 2000 (incorporated by reference to Exhibit 10.10 to our Registration Statement on Form S-4, Commission File No. 333-71684, filed on October 16, 2001)
10.14	Renewal of Lease for Headquarters Space, by and between 6715 Kenilworth Avenue Partnership and Cogent Communications Group, Inc., dated August 5, 2003 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed on November 14, 2003)
10.15	The Amended and Restated Cogent Communications Group, Inc. 2000 Equity Plan (incorporated by reference to Exhibit 10.12 to our Registration Statement on Form S-4, Commission File No. 333-71684, filed on October 16, 2001)
10.16	2003 Incentive Award Plan of Cogent Communications Group, Inc. (incorporated by reference to Exhibit 10.1 to our Registration Statement on Form S-8, Commission File No. 333-108702, filed on September 11, 2003)

80

10.17	2004 Incentive Award Plan of Cogent Communications Group, Inc. (incorporated by reference to Appendix A to our Definitive Information Statement on Schedule 14C, filed on September 22, 2004)
10.18	Dark Fiber Lease Agreement dated November 21, 2001, by and between Cogent Communications, Inc. and Qwest Communications Corporation (incorporated by reference to Exhibit 10.13 to our Registration Statement on Form S-4, as amended by a Form S-4/A (Amendment No. 2), Commission File No. 333-71684, filed on December 7, 2001)
10.19	Robert N. Beury, Jr. Employment Agreement with Cogent Communications Group, Inc., dated June 15, 2000 (incorporated by reference to Exhibit 10.20 to our Annual Report on Form 10-K, filed on March 31, 2003)
10.20	Mark Schleifer Employment Agreement with Cogent Communications Group, Inc., dated September 18, 2000 (incorporated by reference to Exhibit 10.21 to our Annual Report on Form 10-K, filed on March 31, 2003)
10.21	R. Reed Harrison Employment Agreement with Cogent Communications Group, Inc., dated July 1, 2004 (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q, filed on August 16, 2004)
10.22	Participating Convertible Preferred Stock Purchase Agreement, dated as of June 26, 2003, by and among Cogent Communications Group, Inc. and each of the several Investors signatory thereto (incorporated by reference to 10.3 to our Report on Form 8-K filed on August 7, 2003)
10.23	Conversion and Lock-up Letter Agreement, dated as of February 9, 2005, by and among Cogent Communications Group, Inc. and each of the several stockholders signatory thereto (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on February 15, 2005)
10.24	Conversion and Lock-up Letter Agreement, dated as of February 9, 2005, by and among Cogent Communications Group, Inc., Dave Schaeffer and the Schaeffer Descendents Trust (incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K filed on February 15, 2005)
10.25	Brad Kummer Employment Agreement with Cogent Communications Group, Inc., dated January 11, 2000, (incorporated by reference to Exhibit 10.23 to our Registration Statement on Form S-1, Commission File No. 333-122821, filed on February 14, 2005)
10.26	Note Purchase Agreement by and among Cogent Communications Group, Inc. and Columbia Ventures Corporation dated February 24, 2005 (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on February 28, 2005)
10.27	Extension of Lease for Headquarters Space, by and between 6715 Kenilworth Avenue Partnership and Cogent Communications Group, Inc., dated February 3, 2005 (filed herewith)
14.1	Code of Business Conduct and Ethics (filed herewith)
21.1	Subsidiaries (filed herewith)
23.1	Consent of Ernst & Young LLP (filed herewith)
31.1	Certification of Chief Executive Officer (filed herewith)
31.2	Certification of Chief Financial Officer (filed herewith)
32.1	Certification of Chief Executive Officer (filed herewith)
32.2	Certification of Chief Financial Officer (filed herewith)

*Confidential treatment requested and obtained as to certain portions. Portions have been omitted pursuant to this request where indicated by an asterisk.

81

Schedule I

Cogent Communications Group, Inc.
Condensed Financial Information of Registrant
(Parent Company Only)
Condensed Balance Sheets
As of December 31, 2003 and December 31, 2004
(in thousands, except share data)

	2003			2004
ASSETS
Current Assets:
Due from Cogent Communications, Inc.	$	17		$	18
Total current assets	17			18
Other Assets:
Due from Cogent Communications, Inc.	60,286			60,286
Due from Cogent France	—			2,611
Investment in Allied Riser, Inc.	20,746			20,746
Investment in Symposium Omega.	—			19,454
Investment in UFO Group, Inc.	—			2,600
Investment in Cogent Germany.	—			927
Investment in Cogent Potomac	—			18,503
Investment in Cogent Communications, Inc.	178,147			178,147
Total assets	$	259,196		$	303,292
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Due to Cogent Communications, Inc.	$	2,239		$	2,464
Total liabilities	2,239			2,464
Stockholders Equity:
Convertible preferred stock, Series F, $0.001 par value; 11,000 shares authorized, issued and outstanding; liquidation preference of $11,000	10,904			10,904
Convertible preferred stock, Series G, $0.001 par value; 41,030 shares authorized, 41,030 and 41,021 issued and outstanding, respectively; liquidation preference of $123,000	40,787			40,778
Convertible preferred stock, Series H, $0.001 par value; 84,001 shares authorized, 53,372 and 45,821 shares issued and outstanding, respectively; liquidation preference of $7,731	45,990			44,309
Convertible preferred stock, Series I, $0.001 par value; none and 3,000 shares authorized, none and 2,575 shares issued and outstanding, respectively; liquidation preference of $7,725	—			2.545
Convertible preferred stock, Series J, $0.001 par value; none and 3,891 shares authorized, issued and outstanding, respectively; liquidation preference of $58,365	—			19,421
Convertible preferred stock, Series K, $0.001 par value; none and 2,600 shares authorized, issued and outstanding, respectively; liquidation preference of $7,800	—			2,588
Convertible preferred stock, Series L, $0.001 par value; none and 185 shares authorized, issued and outstanding, respectively; liquidation preference of $2,781	—			927
Convertible preferred stock, Series M, $0.001 par value; none and 3,701 shares authorized, issued and outstanding, respectively; liquidation preference of $55,508	—			18,353
Common stock, $0.001 par value; 75,000,000 shares authorized; 653,567 and 827,487 shares issued and outstanding, respectively	1			1
Treasury stock, 61,462 shares	(90		)	(90		)
Additional paid in capital	232,474			236,281
Deferred compensation	(32,680		)	(22,533		)
Stock purchase warrants	764			764
Accumulated deficit	(41,193		)	(53,420		)
Total stockholders’ equity	256,957			300,828
Total liabilities & stockholders equity	$	259,196		$	303,292

The accompanying notes are an integral part of these balance sheets

82

Cogent Communications Group, Inc.
Condensed Financial Information of Registrant
(Parent Company Only)
Condensed Statement of Operations
For the Years Ended December 31, 2003 and 2004
(in thousands)

	2003			2004
Operating expenses:
Amortization of deferred compensation	$	18,675		$	12,262
Total operating expenses	18,675			12,262
Operating loss	(18,675		)	(12,262		)
Interest income—Cogent France	—			35
Net loss	(18,675		)	(12,227		)
Beneficial conversion charge related to preferred stock	(52,000		)	(43,986		)
Net loss applicable to common stock	$	(70,675	)	$	(56,213	)

The accompanying notes are an integral part of these statements

83

Cogent Communications Group, Inc.
Condensed Financial Information of Registrant
(Parent Company Only)
Condensed Statement of Cash Flows
For the Years Ended December 31, 2003 and 2004
(in thousands)

	2003			2004
Cash flows from operating activities:
Net loss	$	(18,675	)	$	(12,227	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Amortization of deferred compensation	18,675			12,262
Changes in Assets and Liabilities:
Accrued interest—Cogent France	—			(35		)
Net cash used in operating activities	—			—
Net increase (decrease) in cash and cash equivalents	—			—
Cash and cash equivalents—beginning of period	—			—
Cash and cash equivalents—end of period	$	—		$	—
Supplemental cash flow disclosures:
Non-cash financing & investing activities:
Investment in Cogent Communications, Inc.	$	60,286		$	—
Investment in Symposium Omega.	—			19,454
Investment in UFO Group, Inc.	—			2,600
Investment in Cogent Germany.	—			927
Investment in Cogent Potomac	—			18,503

The accompanying notes are an integral part of these statements

84

COGENT COMMUNICATIONS GROUP, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Parent Company Only)
AS OF DECEMBER 31, 2003 AND DECEMBER 31, 2004

Note A: Background and Basis for Presentation

Cogent Communications, Inc. (“Cogent”) was formed on August 9, 1999, as a Delaware corporation and is headquartered in Washington, DC. In 2001, Cogent formed Cogent Communications Group, Inc., (the “Company”), a Delaware corporation. Effective on March 14, 2001, Cogent’s stockholders exchanged all of their outstanding common and preferred shares for an equal number of shares of the Company, and Cogent became a wholly owned subsidiary of the Company. This was a tax-free exchange that was accounted for by the Company at Cogent’s historical cost.

The Company is a leading facilities-based provider of low-cost, high-speed Internet access and Internet Protocol communications services. The Company’s network is specifically designed and optimized to transmit data using IP. The Company delivers its services to small and medium-sized businesses, communications service providers and other bandwidth-intensive organizations through over 8,700 customer connections in North America and Europe.

The Company’s primary on-net service is Internet access at a speed of 100 Megabits per second, much faster than typical Internet access currently offered to businesses. The Company offers this on-net service exclusively through its own facilities, which run all the way to its customers’ premises. Because of its integrated network architecture, the Company is not dependent on local telephone companies to serve its on-net customers. The Company’s typical customers in multi-tenant office buildings are law firms, financial services firms, advertising and marketing firms and other professional services businesses. The Company also provides on-net Internet access at a speed of one Gigabit per second and greater to certain bandwidth-intensive users such as universities, other ISPs and commercial content providers.

In addition to providing on-net services, the Company also provides Internet connectivity to customers that are not located in buildings directly connected to its network. The Company serves these off-net customers using other carriers’ facilities to provide the “last mile” portion of the link from its customers’ premises to the Company’s network. The Company also operates 30 data centers throughout North America and Europe that allow customers to colocate their equipment and access our network, and from which the Company provides managed modem service.

The Company has created its network by purchasing optical fiber from carriers with large amounts of unused fiber and directly connecting Internet routers to the existing optical fiber national backbone. The Company has expanded its network through several acquisitions of financially distressed companies or their assets. The overall impact of these acquisitions on the operation of its business has been to extend the physical reach of the Company’s network in both North America and Europe, expand the breadth of its service offerings, and increase the number of customers to whom the Company provides its services.

Reverse Stock Split

On March 24, 2005, the Company effected a 1-for-20 reverse stock split. Accordingly, all share and per share amounts have been retroactively adjusted to give effect to this event.

85

Equity Conversion

In February 2005, the Company’s holders of its preferred stock elected to convert all of their shares of preferred stock into shares of the Company’s common stock (the “Equity Conversion”). As a result, the Company no longer has outstanding shares of preferred stock and the liquidation preferences on preferred stock have been eliminated.

Withdrawal of Public Offering

In May 2004, the Company filed a registration statement to sell shares of common stock in a public offering. In October 2004, the Company withdrew the public offering.

Public Offering

The Company has filed a registration statement to sell up to $86.3 million shares of common stock in an underwritten public offering. There can be no assurances that the Public Offering will be completed.

Note B: Management’s Plans, Liquidity and Business Risks

The Company has experienced losses since its inception in 1999 and as of December 31, 2004 has an accumulated deficit of $53.4 million. The Company operates in the rapidly evolving Internet services industry, which is subject to intense competition and rapid technological change, among other factors. The successful execution of the Company’s business plan is dependent upon the Company’s ability to increase and retain its customers, its ability to integrate acquired businesses and purchased assets into its operations and realize planned synergies, the performance of the Company’s network equipment, the extent to which acquired businesses and assets are able to meet the Company’s expectations and projections, the Company’s ability to retain and attract key employees, and the Company’s ability to manage its growth and geographic expansion, among other factors.

In February 2005, the Company issued a subordinated note for $10 million in cash. In March 2005, the Company entered into a $10.0 million line of credit facility and borrowed $10.0 million under this facility, of which $4.0 million is restricted and held by the lender. In March 2005, the Company sold its building located in Lyon, France for net proceeds of approximately $5.1 million. Management believes that cash generated from the Company’s operations combined with the amounts received from these transactions is adequate to meet the Company’s future funding requirements. Although management believes that the Company will successfully mitigate its risks, management cannot give assurances that it will be able to do so or that the Company will ever operate profitably. maturity date.

Note C: Accounting for Investments

The Company accounts for its investments in its subsidiaries at cost.

Acquisition of Aleron Broadband Services (“Aleron”)

In October 2004, the Company acquired certain assets of Aleron Broadband Services, formally known as AGIS Internet in exchange for 3,700 shares of its Series M preferred stock. The Series M preferred stock was convertible into approximately 5.7 million sharesof the Company’s common stock and converted into common stock in connection with the Equity Conversion. The Company acquired Aleron’s customer base and network, as well as Aleron’s Internet access and managed modem service.

Acquisition of Global Access

In September 2004, the Company issued 185 shares of Series L preferred stock to the shareholders of Global Access Telecommunications, Inc. (“Global Access”) in exchange for the majority of the assets of Global Access. The Series L preferred stock was convertible into approximately 0.3 million sharesof the

86

Company’s common stock and converted into common stock in connection with the Equity Conversion. The estimated fair market value for the Series L preferred stock was determined by using the price per share of the Company’s Series J preferred stock. Global Access was headquartered in Frankfurt, Germany and provided Internet access and other data services in Germany.

Merger with UFO Group, Inc.

In August 2004, a subsidiary of the Company merged with UFO Group, Inc. (“UFO Group”). The Company issued 2,600 shares of Series K preferred stock in exchange for the outstanding shares of UFO Group. The Series K preferred stock was convertible into approximately 0.8 million sharesof the Company’s common stock and converted into common stock in connection with the Equity Conversion. The estimated fair market value for the Series K preferred stock was determined by using the price per share of the Company’s Series J preferred stock.

Merger with Symposium Omega

In March 2004, Symposium Omega, Inc., (“Omega”) a Delaware corporation and related party, merged with a subsidiary of the Company (Note 12). Prior to the merger, Omega had raised approximately $19.5 million in cash in a private equity transaction with certain existing investors in the Company and acquired the rights to a German fiber optic network. The German fiber optic network had no customers, employees or associated revenues. The Company issued 3,891 shares of Series J preferred stock to the shareholders of Omega in exchange for all of the outstanding common stock of Omega. The Series J preferred stock was convertible into approximately 6.0 million sharesof the Company’s common stock and converted into common stock in connection with the Equity Conversion.

Merger with Symposium Gamma, Inc. and Acquisition of Firstmark Communications Participations S.à r.l. and Subsidiaries (“Firstmark”)

In January 2004, a subsidiary of the Company merged with Symposium Gamma, Inc. (“Gamma”). Immediately prior to the merger, Gamma had raised $2.5 million through the sale of its common stock in a private equity transaction with certain existing investors in the Company and new investors and in January 2004, acquired Firstmark for 1 euro. The merger expanded the Company’s network into Western Europe. Under the merger agreement all of the issued and outstanding shares of Gamma common stock were converted into 2,575 shares of the Company’s Series I preferred stock. The Series I preferred stock was convertible into approximately 0.8 million sharesof the Company’s common stock and converted into common stock in connection with the Equity Conversion. In 2004, Firstmark changed its name to Cogent Europe S.à r.l (“Cogent Europe”).

Note D: Stockholders Equity

In June 2003, the Company’s board of directors and shareholders approved an amended and restated charter that eliminated the reference to the Company’s Series A, B, C, D, and E preferred stock (“Existing Preferred Stock”). In March 2005, the Company’s board of directors and shareholders approved an amended and restated charter that increased the number of authorized shares of the Company’s common stock to 75.0 million shares and designated 10,000 shares of undesignated preferred stock.

On July 31, 2003 and in connection with the Company’ restructuring of its debt with Cisco Capital, all of the Company’s Existing Preferred Stock was converted into approximately 0.5 million shares of common stock. At the same time the Company issued 11,000 shares of Series F preferred stock to Cisco Capital under the Exchange Agreement and issued 41,030 shares of Series G preferred stock for gross proceeds of $41.0 million to the Investors under the Purchase Agreement.

87

In January 2004, Symposium Gamma Inc. (“Gamma”) merged with a subsidiary of the Company. Under the merger agreement, all of the issued and outstanding shares of Gamma common stock were converted into 2,575 shares of the Company’s Series I preferred stock and the Company became Gamma and Cogent Europe’s sole shareholder.

On March 30, 2004, Symposium Omega, Inc., (“Omega”) merged with a subsidiary of the Company. Prior to the merger Omega had raised approximately $19.5 million in cash and acquired the rights to acquire a German fiber optic network. The Company issued 3,891 shares of Series J preferred stock to the shareholders of Omega in exchange for all of the outstanding common stock of Omega.

On August 12, 2004, UFO Group, Inc., (“UFO Group”) merged with a subsidiary of the Company. Prior to the merger UFO Group had raised net cash of approximately $2.1 million and acquired the rights to acquire the majority of the assets of Unlimited Fiber Optics, Inc. The Company issued 2,600 shares of Series K preferred stock to the shareholders of UFO Group in exchange for all of the outstanding common stock of UFO Group.

On September 15, 2004, the Company issued 185 shares of Series L preferred stock to the shareholders of Global Access Telecommunications Inc. (“Global Access”) in exchange for the majority of the assets of Global Access.

On October 26, 2004, the Company merged with Cogent Potomac, Inc. (“Potomac”). The Company issued 3,700 shares of Series M preferred stock in exchange for all of the outstanding common shares of Potomac. Prior to the merger, Potomac had acquired the majority of the assets of Aleron Broadband Services LLC (“Aleron”).

Each share of the Series F preferred stock, Series G preferred stock, Series H preferred stock, Series I preferred stock, Series J preferred stock, Series K preferred stock, Series L preferred stock and Series M preferred stock (collectively, the “New Preferred”) may be converted into shares of common stock at the election of its holder at any time. The Series F, Series G, Series I, Series J, Series K, Series L and Series M preferred stock were convertible into 3.4 million, 12.7 million, 0.8 million, 6.0 million, 0.8 million, 0.3 million and 5.7 million shares of the Company’s common stock, respectively. In March 2005, the New Preferred was converted into voting common stock. The liquidation preferences on the New Preferred were also eliminated.

Dividends

Cogent’s Cisco credit facility and the Company’s line of credit prohibit the Company from paying cash dividends and restricts the Company’s ability to make other distributions to its stockholders.

Beneficial Conversion Charges

Beneficial conversion charges of $2.5 million, $19.5 million, $2.6 million, $0.9 million and $18.5 million were recorded on January 5, 2004, March 30, 2004, August 12, 2004, September 15, 2004, and October 26, 2004 respectively, since the price per common share at which the Series I, Series J, Series K, Series L and Series M preferred stock converts into were less than the quoted trading price of the Company’s common stock on that date.

Note E: Deferred Compensation Charges—Stock Options and Restricted Stock

In September 2003, the Compensation Committee (the “Committee”) of the board of directors adopted and the stockholders approved, the Company’s 2003 Incentive Award Plan (the “Award Plan”). The Award Plan reserved 54,001 shares of Series H preferred stock for issuance under the Award Plan. In September 2003, the Company offered its employees the opportunity to exchange eligible outstanding stock options and certain common stock for restricted shares of Series H preferred stock under the Award

88

Plan. In 2004, the Company’s board of directors and shareholders approved the Company’s 2004 Incentive Award Plan that increased the shares of Series H preferred stock available for grant as either restricted shares or options for restricted shares under the Award Plan from 54,001 to 84,001 shares. In July 2004, the Company began granting options for Series H preferred stock. Each share of Series H preferred stock and each option for Series H preferred stock was convertible into approximately 38 shares of common stock and were converted in connection with the Equity Conversion. The Series H preferred shares were valued using the trading price of the Company’s common stock on the grant date. For restricted shares granted under the offer to exchange, the vesting period was 27% upon grant with the remaining shares vesting ratably over a three year period and for share and options grants to newly hired employees; the shares generally vest 25% after one year with the remaining shares vesting ratably over three years.

The Company recorded a deferred compensation charge of approximately $14.3 million in the fourth quarter of 2001 related to options granted at exercise prices below the estimated fair market value of the Company’s common stock on the date of grant. The deferred compensation charge was amortized over the vesting period of the related options which was generally four years. In connection with the October 2003 offer to exchange and granting of Series H preferred stock the remaining $3.2 million unamortized balance of deferred compensation is now amortized over the vesting period of the Series H preferred stock.

In July 2004, the Company began granting options for Series H preferred stock, 17,500 of which were granted with an exercise price below the trading price of the Company’s common stock on grant date. These option grants resulted in additional deferred compensation of $4.7 million recorded during the third quarter of 2004. Deferred compensation for these option grants was determined by multiplying the difference between the exercise price and the market value of the Series H preferred stock on grant date times the number of options granted and is being amortized over the service period.

Under the offer to exchange, the Company recorded a deferred compensation charge of approximately $46.1 million in the fourth quarter of 2003. The Company has also granted additional shares of Series H preferred to its new employees resulting in an additional deferred compensation. For grants of restricted stock, when an employee terminates prior to full vesting, the total remaining deferred compensation charge is reduced, the employee retains their vested shares and the employees’ unvested shares are returned to the plan. For grants of options for restricted stock, when an employee terminates prior to full vesting, the total remaining deferred compensation charge is reduced, previously recorded deferred compensation is reversed and the employee may elect to exercise their vested options for a period of ninety days and any of the employees’ unvested options are returned to the plan. Deferred compensation for the granting of Series H preferred restricted shares was determined using the trading price of the Company’s common stock on the grant date.

The amortization of deferred compensation expense related to stock options and restricted stock was approximately $18.7 million for the year ended December 31, 2003 and $12.3 million for the year ended December 31, 2004.

89

Schedule II

COGENT COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS

Description	Balance at Beginning of Period			Charged to Costs and Expenses(a)			Acquisitions			Deductions			Balance at End of Period
Allowance for doubtful accounts (deducted from accounts receivable), (in thousands)
Year ended December 31, 2002		$	112		$	3,887		$	2,863		$	4,839		$	2,023
Year ended December 31, 2003		$	2,023		$	5,165		$	125		$	4,445		$	2,868
Year ended December 31, 2004		$	2,868		$	4,406		$	2,247		$	6,292		$	3,229
Allowance for Credits (deducted from accounts receivable), (in thousands)
Year ended December 31, 2002		$	—		$	200		$	—		$	—		$	200
Year ended December 31, 2003		$	200		$	—		$	—		$	50		$	150
Year ended December 31, 2004		$	150		$	140		$	—		$	140		$	150
Allowance for Unfulfilled Purchase Obligations (deducted from accounts receivable), (in thousands)
Year ended December 31, 2002		$	—		$	2,038		$	—		$	2,023		$	15
Year ended December 31, 2003		$	15		$	1,317		$	—		$	1,015		$	317
Year ended December 31, 2004		$	317		$	537		$	1,254		$	1,944		$	164
Restructuring accrual), (in thousands)
Year ended December 31, 2004		$	—		$1,821			$	—		$	345		$	1,476

(a)Bad debt expense, net of recoveries, was approximately $3.2 million for the year ended December 31, 2002 and $3.9 million for the year ended December 31, 2003 and $4.0 million for the year ended December 31, 2004.

90

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	COGENT COMMUNICATIONS GROUP, INC.
Dated: March 31, 2005	By:
		Name: David Schaeffer
		Title: Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

	Signature		Title		Date
/s/ DAVID SCHAEFFER		Chairman and Chief Executive Officer		March 31, 2005
David Schaeffer		(Principal Executive Officer)
/s/ THADDEUS G. WEED		Chief Financial Officer		March 31, 2005
Thaddeus G. Weed		(Principal Financial and Accounting Officer)
/s/ EDWARD GLASSMEYER		Director		March 31, 2005
Edward Glassmeyer
/s/ EREL MARGALIT		Director		March 31, 2005
Erel Margalit
/s/ JEAN-JACQUES BERTRAND		Director		March 31, 2005
Jean-Jacques Bertrand
/s/ TIMOTHY WEINGARTEN		Director		March 31, 2005
Timothy Weingarten
/s/ STEVEN BROOKS		Director		March 31, 2005
Steven Brooks
/s/ MICHAEL CARUS		Director		March 31, 2005
Michael Carus
/s/ KENNETH D. PETERSON, JR.		Director		March 31, 2005
Kenneth D. Peterson, Jr.

91

EX-2.6

Exhibit 2.6

AGREEMENT AND PLAN OF MERGER

DATED AS OF August 12, 2004

AMONG

COGENT COMMUNICATIONS GROUP, INC.,

MARVIN INTERNET, INC.

AND

UFO GROUP, INC.

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER, dated as of August 10, 2004 (this “Agreement”), by and among COGENT COMMUNICATIONS GROUP, INC., a Delaware corporation (“Parent”), MARVIN INTERNET INC., a Delaware corporation and a wholly-owned Subsidiary of Parent (“Merger Sub”), and UFO GROUP, INC., a Delaware corporation (the “Company”).

W I T N E S S E T H :

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have each determined that the Merger (as defined below) is in the best interests of their respective stockholders and have approved the Merger upon the terms and subject to the conditions set forth in this Agreement, whereby each issued and outstanding share of Common Stock, par value $.01  per share, of the Company (“Company Common Stock”), will be converted into the right to receive one share of Series K Participating Convertible Preferred Stock, par value $.001 per share, of Parent (the “Series K Preferred Stock”);

WHEREAS, in order to effectuate the foregoing, Merger Sub, upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the “DGCL”), will merge with and into the Company (the “Merger”);

WHEREAS, the Company intends to acquire substantially all of the assets of UFO Communications, Inc. (the “Acquisition”); and

WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I.
THE MERGER

1.1The Merger.  Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 251 of the DGCL, Merger Sub shall be merged with and into the Company at the Effective Time (as defined below).  Following the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation (the “Surviving Corporation”) in accordance with the DGCL.

1.2Closing.  The closing of the Merger (the “Closing”) will take place on the date all the conditions set forth in Article IV of this Agreement have been satisfied or waived, or if not, as soon as practicable after satisfaction or waiver (as permitted by this Agreement and applicable law) of the conditions (excluding conditions that, by their terms, cannot be satisfied until the Closing Date) set forth in Article VI (the “Closing Date”), unless another time or date is agreed to in writing by the parties hereto.

1

1.3Effective Time.  Upon the Closing, the parties shall file with the Secretary of State of the State of Delaware a certificate of merger or other appropriate documents (in any such case, the “Certificate of Merger”) executed in accordance with the relevant provisions of the DGCL and shall make all other filings, recordings or publications required under the DGCL in connection with the Merger.  The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Delaware Secretary of State and the applicable Series K Preferred Stock shall have been issued to the holders of the Company Common Stock, or at such other time as the parties may agree and specify in the Certificate of Merger (the time the Merger becomes effective being the “Effective Time”).

1.4Effects of the Merger.  At and after the Effective Time, the Merger will have the effects set forth in Section 259 of the DGCL.

1.5Certificate of Incorporation.  The certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law, provided that such certificate of incorporation shall be amended to reflect “UFO Group, Inc.” as the name of the Surviving Corporation.

1.6Bylaws.  The bylaws of Merger Sub as in effect at the Effective Time shall be the bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.

1.7Officers and Directors of Surviving Corporation.  The officers and directors of Merger Sub shall be the officers and directors of the Surviving Corporation until the earlier of their resignation or removal or otherwise ceasing to be an officer or director or until their respective successors are duly elected and qualified, as the case may be.

ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES

2.1Effect on Capital Stock.  As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock or any shares of capital stock of Merger Sub:

(a)Capital Stock of Merger Sub.  Each issued and outstanding share of capital stock of Merger Sub shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation.

(b)Cancellation of Treasury Stock and Parent-Owned Stock.  Each share of Company Common Stock that is owned by the Company or by a wholly owned subsidiary of the Company and each share of Company Common Stock that is owned by Parent, Merger Sub or any other wholly owned subsidiary of Parent shall automatically be canceled and retired and shall cease to exist, and no Series K Preferred Stock or other consideration shall be delivered in exchange therefor.

2

(c)Conversion of Company Common Stock.  Each issued and outstanding share of Company Common Stock (other than shares to be canceled in accordance with Section 2.1(b)) shall automatically be converted into the right to receive one fully paid and nonassessable share of Series K Preferred Stock.  As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive upon the surrender of such certificates, certificates representing the shares of Series K Preferred Stock.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

3.1Representations and Warranties of the Company.  The Company hereby represents and warrants to Parent and Merger Sub as follows:

(a)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.

(b)Authorization.  The Company has all requisite corporate power and corporate authority to enter into this Agreement and to consummate the Merger and the other transactions contemplated hereby.  The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger have been duly authorized by all necessary corporate action on the part of the Company.  This Agreement has been duly executed and delivered by the Company and 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).

(c)Capitalization.  The authorized capital stock of the Company consists, or will consist, immediately prior to the Closing, of 2600 shares of Common Stock, of which 2600 shares are issued and outstanding. All of the issued and outstanding shares of the Company’s Common Stock were validly issued and are fully paid and nonassessable.

(d)No subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase or acquire any shares of capital stock of the Company is authorized or outstanding, (ii) the Company has no obligation (contingent or otherwise) to issue any subscription, warrant, option, convertible security or other such right or to issue or distribute to holders of any shares of its capital stock any evidences of indebtedness or assets of the Company or any of its subsidiaries, and (iii) the Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof.

3

(e)Subsidiaries.  The Company does not own or control, directly or indirectly, any interest in any other corporation, association, or other business entity.

(f)Corporate Documents.  The Certificate and Bylaws of the Company are in the form provided to counsel for the stockholders of the Company.

3.2Representations and Warranties of Parent.  Except as set forth in the Parent Disclosure Schedule delivered by Parent to the Company at or prior to the execution of this Agreement (the “Parent Disclosure Schedule”), Parent represents and warrants to the Company as follows:

(a)Organization, Good Standing and Qualification.  Parent and Merger Sub are corporations duly organized, validly existing and in good standing under the laws of Delaware and each has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted.  All of the shares of stock of Merger Sub are owned by Parent.

(b)Authorization.  Each of Parent and Merger Sub has all requisite corporate power and corporate authority to enter into this Agreement and to consummate the Merger and the other transactions contemplated hereby.  The execution, delivery and performance by each of Parent and Merger Sub of this Agreement and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby, including, without limitation, the filing of the Certificate of Designation, as defined herein, by Parent and the issuance of the Series K Preferred Stock have been, and immediately before the date that the Series K Preferred Stock become convertible the reservation for issuance of all Conversion Shares (as defined below) issuable upon conversion of the Series K Preferred Stock will have been, duly authorized by all necessary corporate action on the part of Parent and Merger Sub and no further consent or authorization is required by Parent or Merger Sub or their respective boards of directors or stockholders.  This Agreement has been duly executed and delivered by Parent and Merger Sub and constitutes a valid and binding agreement of Parent and Merger Sub, enforceable against each of them 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).

(c)Parent Capitalization.

(i)Immediately prior to the Closing and without giving effect to the Merger the Parent will have a total authorized capitalization consisting of:

(A)600,000,000 shares of common stock, par value $.001 (the “Common Stock”) of which (a) 16,045,111 shares are issued and outstanding, (b) 1,432,872 shares remain reserved for issuance pursuant to stock purchase, stock grant or stock option arrangements for employees, directors or consultants of the Parent, (c) 155,809 shares remain reserved for issuance to holders of shares of the common stock of Allied Riser, (d) 21,329 remain reserved for issuance upon the conversion of Allied Riser convertible notes, (e) 103,777 shares remain reserved for issuance pursuant to warrants granted in connection with

4

certain agreements between Allied Riser and certain landlords relating to building access rights, (f) 68,199,901 shares are reserved for issuance upon conversion of the Series F Participating Convertible Preferred Stock of Parent (the “Series F Preferred Stock”), (g) 254,947,501 shares are reserved for issuance upon conversion of the Series G Participating Convertible Preferred Stock of Parent (the “Series G Preferred Stock”), (h) 61,664,672 shares are reserved for issuance upon conversion of the Series H Participating Convertible Preferred Stock of Parent (the “Series H Preferred Stock”), (i) 15,962,585 shares are reserved for issuance upon conversion of the Series I Participating Convertible Preferred Stock of Parent (the “Series I Preferred Stock”), (j) 120,605,177 shares are reserved for issuance upon conversion of the Series J Participating Convertible Preferred Stock of Parent (the “Series J Preferred Stock”), and (k) 16,119,033 shares are reserved for issuance upon conversion of the Series K Participating Convertible Preferred Stock of Parent (the “Series K Preferred Stock”).

(B)170,000 shares of the Parent’s preferred stock, $.001 par value per share (the “Preferred Stock”), of which (a) 24,478 shares are authorized but unissued Preferred Stock, (b) 11,000 shares are designated as Series F Preferred Stock, all of which are issued and outstanding, (c) 41,030 shares are designated as Series G Preferred Stock, all of which are issued and outstanding, (d) 84,001 shares are designated as Series H Preferred Stock, of which 47,308 shares are issued and outstanding and, (e) 3,000 shares are designated as Series I Preferred Stock, of which 2,575 shares are issued and outstanding, (f) 3,891 shares are designated as Series J Preferred Stock, of which 3,891 shares are issued and outstanding and (g) 2,600 shares are designated Series K Preferred Stock, of which 0 shares are issued and outstanding.

(ii)All the outstanding shares of capital stock of the Parent have been duly authorized, and are validly issued, fully paid and non-assessable and were issued in compliance with all applicable state and federal laws concerning the issuance of securities.  The Series K Preferred Stock, when issued and delivered in accordance with the terms hereof, will be (i) duly authorized, validly issued, fully-paid and non-assessable, (ii) free from all taxes, liens and charges with respect to the issuance thereof and (iii) entitled to the rights and preferences set forth in the Certificate of Designation.  Such shares of Common Stock issuable upon conversion of the Series K Preferred Stock, when issued and delivered upon conversion of any of the Series K Preferred Stock (the “Conversion Shares”), will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock.  Immediately before the date that the Series K Preferred Stock become convertible, there shall have been reserved, free of preemptive rights and other preferential rights, a sufficient number of authorized but unissued shares of Common Stock to satisfy the conversion rights of the holders of the Series K Preferred Stock.

(iii)Except pursuant to the Parent’s 2004 Incentive Award Plan, no options, warrants, subscriptions, convertible securities, phantom stock, stock appreciation rights or other rights (contingent or otherwise) of any nature to acquire from the Parent shares of capital stock or other securities are authorized, issued or outstanding, nor is the Parent obligated in any other manner to issue shares of its capital stock or other securities except as contemplated by this Agreement.  There are no restrictions on the transfer of shares of capital stock of the Parent other than those imposed by relevant federal and state securities laws and as otherwise contemplated by this Agreement, the Parent’s Third Amended and Restated Stockholders Agreement (the

5

“Existing Stockholders Agreement”) and the Parent’s Fourth Amended and Restated Registration Rights Agreement (the “Existing Registration Rights Agreement”).  To Parent’s knowledge, the Existing Stockholders Agreement sets forth the only agreements among stockholders regarding voting rights and obligations applicable to Parent’s securities.  The Existing Registration Rights Agreement sets forth the only registration rights and obligations applicable to the Parent’s securities.

(d)No Conflicts, Preemptive rights or Rights of First Refusal.

(i)The execution, delivery and performance of this Agreement by Parent and the Merger Sub, the performance by Parent and Merger Sub of their respective obligations hereunder and the consummation by Parent and Merger Sub of the transactions contemplated hereby will not:

(A)result in a violation of the certificate of incorporation or bylaws of either Parent or Merger Sub;

(B)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 Parent, Merger Sub or any Subsidiary of Parent 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);

(C)result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of Parent, Merger Sub or any Subsidiary of Parent other than a lien on the stock of Merger Sub pursuant to Parent’s secured credit facility with Cisco Credit Corporation; or

(D)result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the American Stock Exchange) applicable to Parent, Merger Sub or any Subsidiary of Parent or by which any property or asset of Parent, Merger Sub or any Subsidiary of Parent is bound or affected.

(ii)Except for the filing of the Certificate of Designation with the Secretary of State of the State of Delaware, neither Parent nor Merger Sub is 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.

(iii)The sale of the Series K Preferred Stock is not, and subsequent to the conversion of the Series K Preferred Stock into Common Stock will not be, subject to

6

any preemptive rights or rights of first refusal that have not been properly waived or complied with.

(e)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 Parent, threatened or contemplated to which Parent is or may be a party or of which the business or property of Parent is or may be subject.

(f)No Violations.  Except as disclosed in the SEC Filings, Parent 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 Parent, which violation, individually or in the aggregate, would have a material adverse effect on the business or financial condition of Parent, 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 Parent is a party or by which Parent is bound or by which the properties of Parent are bound or affected.

(g)Governmental Permits, Etc.  Except as disclosed in the SEC Filings, Parent 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 Parent as currently conducted, the absence of which would have a material adverse effect on the business or operations of Parent.

(h)Financial Statements.  The financial statements of Parent and the related notes, as set forth in Parent’s SEC Filings (the “Financial Statements”), present fairly the financial position of Parent as of the dates indicated therein and its results of operations and cash flows for the periods therein specified. The Financial Statements (including the related notes) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods therein specified.

(i)Additional Information.

(i)Parent has filed in a timely manner all documents that Parent 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 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)Parent’s Annual Report on Form 10-K for the year ended December 31, 2003; and

7

(B)all other documents, if any, filed by Parent with the Securities and Exchange Commission (the “SEC”) since the filing of the Annual Report on Form 10-K for the year ended December 31, 2003 pursuant to the reporting requirements of the Exchange Act.

(ii)As of their respective dates, the financial statements of Parent included in the SEC Filings 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 Parent 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, Parent 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 Parent.  Without limiting the foregoing, except as specified in the SEC Filings, Parent 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 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.

(j)No General Solicitation.  Neither Parent, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Series K Preferred Stock.

(k)No Integrated Offering.  Neither Parent, nor any of its affiliates, nor any person acting on its or their 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 Series K Preferred Stock under the Securities Act or cause this offering of the Series K Preferred Stock to be integrated with prior offerings by Parent 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 Parent or any of its subsidiaries take any action or steps that would require registration of the Series K Preferred Stock under the Securities Act or cause the offering of the Series K Preferred Stock to be integrated with other offerings.

8

(l)Internal Accounting Controls.  Parent 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 generally accepted accounting principles 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.

(m)Private Placement.  The offer, sale and issuance of the Series K Preferred Stock as contemplated by this Agreement is exempt from the registration requirements of the Securities Act and all applicable state securities laws.

(n)Merger Sub Business Activities.  Merger Sub is not a party to any material agreements and has not conducted any activities other than in connection with the organization of Merger Sub, the negotiation and execution of this Agreement and the consummation of the Merger.  Merger Sub has no Subsidiaries.

(o)Corporate Documents.  The Certificate and Bylaws of the Parent are in the form provided to counsel for the stockholders of the Company.

(p)Anti-Dilution Adjustments  The issuance of the Series K Preferred Stock does not, and, assuming filing of the Carve-Out Amendment (as defined in Section 4.2(d) below) with the Secretary of State of the State of Delaware, the subsequent conversion of the Series K Preferred Stock into Common Stock will not, trigger any anti-dilution rights or other similar conversion price adjustments with respect to any securities of Parent.

(q)Related-Party Transactions  No employee, officer, stockholder or director of Parent or its subsidiaries or member of his or her immediate family is indebted to Parent or any of its subsidiaries, nor is Parent indebted (or committed to make loans or extend or guarantee credit) to any of them, other than (i) for payment of salary for services rendered, (ii) for reimbursement for reasonable expenses incurred on behalf of Parent, (iii) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of Parent), (iv) as disclosed in the Parent Disclosure Schedule or (v) disclosed in the SEC filings.  To the best of Parent’s knowledge, none of such persons has any direct or indirect ownership interest in any firm or corporation with which Parent is affiliated or with which Parent has a business relationship, or any firm or corporation that competes with Parent, except that employees, stockholders, officers, or directors of Parent and members of their immediate families may own stock in publicly traded companies that may compete with Parent. To the best of Parent’s knowledge, no officer, director, or stockholder or any member of their immediate families is, directly or indirectly, interested in any material contract with Parent or any of its subsidiaries (other than such contracts as relate to any such person’s ownership of capital stock or other securities of Parent).

9

(r)Reliance on Representations and Warranties.  Parent acknowledges that it enters into this Agreement and agrees to consummate the transactions contemplated hereby in sole reliance on the express representations and warranties contained in this Agreement and not upon any other information furnished to Parent by the Company or any other person.  PARENT ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE COMPANY MAKES NO REPRESENTATION OR WARRANTY CONCERNING THE COMPANY, ITS ASSETS, OR ANY OTHER MATTER PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING, WITHOUT LIMITATION, AS TO THE QUALITY, CONDITION, MERCHANTABILITY, SALABILITY, OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A PARTICULAR PURPOSE OF THE COMPANY’S ASSETS AND, EXCEPT AS PROVIDED HEREIN, PARENT IS ACQUIRING THE COMPANY’S ASSETS IN THE MERGER “AS IS AND WHERE IS”.

ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS

4.1Covenants of the Company.  The Company agrees and covenants to use its best efforts to cause the consummation of the Merger and further agrees and covenants not to take any action that is inconsistent with its obligations under this Agreement in any material respect that could reasonably be expected to hinder or delay the consummation of the Merger.

4.2Covenants of Parent and Merger Sub.

(a)Certificate of Designation.  Prior to the Closing, the Parent shall file with the Secretary of State of the State of Delaware a certificate of designation in the form set forth on Exhibit A hereto setting forth the rights and preferences of the holders of Series K Preferred Stock (the “Certificate of Designation”).

(b)Other Actions.  Parent and Merger Sub agree and covenant to use their best efforts to cause the consummation of the Merger and further agree and covenant not to take any action that is inconsistent with their obligations under this Agreement in any material respect that could reasonably be expected to hinder or delay the consummation of the Merger.

(c)Reservation of Conversion Shares.  From and after the Closing and for so long as any shares of Series K Preferred Stock are outstanding, Parent covenants and agrees to continue to reserve, free of preemptive rights and other preferential rights, a sufficient number of authorized but unissued shares of its Common Stock to satisfy the rights of conversion of the holders of the Series K Preferred Stock.

(d)Additional Post-Closing Covenants. Parent and Merger Sub shall use their respective best endeavors to procure, as promptly as possible after Closing, that the certificate of incorporation of Parent be amended to amend the terms of each sub-series of Parent’s Series G Participating Convertible Preferred Stock and Parent’s Series H Participating Convertible Preferred Stock to provide that the issuance of the Series K Preferred Stock or the conversion of such shares into Common Stock shall not be deemed an issuance of “Additional Shares of Common Stock” or otherwise result in a change in the Conversion Price of such preferred stock as that term is defined in the respective Certificates of Designations, Preferences and Relative,

10

Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions (the “Carve-out Amendment”).  In addition, Parent shall cause its subsidiary Cogent Communications, Inc. to enter into a management services agreement with Company for the provision of management support for Company during a period of 90 days unless such agreement is terminated earlier in accordance with its terms.

ARTICLE V.
ADDITIONAL AGREEMENTS

5.1Claims for Indemnification.

(a)Parent shall indemnify and hold harmless, prior to the Merger, Company and each holder of Company Common Stock, and following the Merger, Company and each holder of Series K Preferred Stock, and Company’s and such holder’s respective officers, directors, employees, agents, partners, representatives, subsidiaries, affiliates and permitted successors and assigns from and against, and promptly reimburse for, any and all loss, diminution in value, damage, cost, expense (including court costs and reasonable attorneys’ fees and costs of investigation), fine, penalty, suit, action, claim, deficiency, liability or obligation (collectively, “Losses”) caused by or arising from (i) any breach by Parent or Merger Sub of any representation, warranty or other provision set forth in this Agreement, (ii) any and all claims of third parties made based upon facts alleged that, if true, would constitute any breach set forth in clause (i) above, or (iii) any claims by third parties relating to the Acquisition or the Merger.

(b)The representations, warranties, covenants and agreements contained in this Agreement shall not be affected by any party hereto or by anyone on behalf of any such party: (i) investigating, verifying or examining any matters with respect to Parent or Merger Sub or the transactions contemplated hereby; (ii) having the opportunity to investigate, verify or examine any matters related to Parent or Merger Sub or the transactions contemplated hereby; or (iii) failing to determine or discover any facts which were determinable or discoverable by any such party.  All rights contained in this Agreement are cumulative and are in addition to all other rights and remedies that are otherwise available pursuant to the terms of this Agreement or applicable law.

5.2Exculpation.  Parent and Merger Sub agree with the Company that each of Parent and Merger Sub and their agents, advisors, assigns, and successors, as applicable, fully and generally agree to waive, release, remise, acquit, and discharge prior to the Merger, Company and each holder of Company Common Stock and after the Merger, each holder of Series K Preferred Stock and each of their affiliates and their respective present or former officers, directors, partners, joint venturers and successors and assigns (collectively, the “Releasees”) and covenant not to sue or otherwise institute or cause to be instituted or in any way participate in (except at the request of the applicable Releasee) any legal or other proceedings or actions against any Releasee with respect to any matter whatsoever arising out of or relating to this Agreement, including, but not limited to any and all liabilities, claims, demands, contracts, debts, obligations, and causes of action of every nature, kind and description, in law, equity, or otherwise, whether or not now known or ascertained, which heretofore do, or hereafter may, exist.  This Section 5.2 shall not apply to any fraudulent act by a Releasee or with respect to a

11

breach of any representation, warranty or other provision of the Company set forth in this Agreement.

5.3Defense of Third-party Claims.  With respect to each third-party claim subject to Section 5.1 (a “Third-party Claim”), the party seeking indemnification (the “Indemnified Party”) shall give prompt notice to Parent of the Third-party Claim, provided that failure to give such notice promptly shall not relieve or limit the obligations of Parent except to the extent Parent is prejudiced thereby.  Parent, at its sole cost and expense, may, upon notice of the Third-party Claim, assume the defense of the Third-party Claim.  If it assumes the defense of a Third-party Claim, then Parent shall select counsel reasonably satisfactory to the Indemnified Party to conduct the defense.  Parent shall not consent to a settlement of, or the entry of any judgment arising from, any Third-party Claim, unless (i) the settlement or judgment is solely for money damages and Parent admits in writing its liability to hold the Indemnified Party harmless from and against any losses, damages, expense and liabilities arising out of such settlement or (ii) the Indemnified Party consents thereto, which consent shall not be unreasonably withheld and, in the case of either clause (i) or clause (ii), the settlement contains an unconditional release of the Indemnified Party with respect to the Third-party Claim from each Person asserting such claim and does not contain an admission of fault on the part of the Indemnified Party.  Parent shall provide the Indemnified Party with fifteen (15) days prior notice before it consents to a settlement of, or the entry of a judgment arising from, any Third-party Claim.  The Indemnified Party shall be entitled to participate in the defense of any Third-party Claim, the defense of which is assumed by Parent, with its own counsel and at its own expense.  With respect to Third-party Claims in which the remedy sought is not solely money damages, (i) Parent shall, upon notice to the Indemnified Party within fifteen (15) days after Parent receives notice of the Third-party Claim, be entitled to participate in the defense with its own counsel at its own expense and (ii) the Indemnified Party shall not consent to any settlement of, or entry of any judgment arising from, such Third-party Claim unless Parent consents thereto, which consent shall not be unreasonably withheld.  If Parent does not elect to assume or participate in the defense of any Third-party Claim in accordance with the terms of this Section, then Parent shall be bound by the results obtained by the Indemnified Party with respect to the Third-party Claim.  The parties shall cooperate in the defense of any Third-party Claim and the relevant records of each party shall be made available on a timely and reasonable basis.

5.4Survival.  All representations, warranties, covenants and agreements of Parent and the Company contained herein shall survive the execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated hereby.

5.5Further Assurances.  In case at any time after the Effective Time any further action is reasonably necessary to carry out the purposes of this Agreement, the proper officers of the Company, Parent and Merger Sub shall take any such reasonably necessary action.

5.6Acknowledgment Regarding Series K Preferred Stock.

Parent agrees that, for purposes of clarification of the Secondary Liquidation Preference of the Series K Preferred Stock in the Certificate of Designations of the Series K Preferred Stock, the use of the term “Senior Stock — Secondary” is a place holder that would allow Parent to issue in the future a series of preferred stock with a liquidation preference that

12

was junior to the Series K Preferred Stock primary liquidation preference but senior to the Series K secondary liquidation preference.  Parent agrees that there are no currently outstanding shares of Senior Stock — Secondary that are distinct from the shares of Pari Passu Stock – Primary and that the use of the term Senior Stock — Secondary does not entitle the Series F, G, I and J Preferred Stock to double their primary liquidation preference. Thus, Parent agrees that, immediately following the Merger, the relative ranking (in terms of liquidation preference) of the outstanding shares of preferred stock of Parent will be as follows: first, on a pari passu basis, the shares of Series F, G, I, J and K Preferred Stock will receive their primary liquidation preference (an amount equal to one times their respective original purchase prices); second, on a pari passu basis, the shares of Series G, I, J and K Preferred Stock will receive their secondary liquidation preference (an amount equal to two times their respective original purchase prices) and the Series H Preferred Stock will receive its primary liquidation preference (an amount equal to $161 per share); third, the Series F Preferred Stock will receive its secondary liquidation preference (an amount equal to $1,647.0883 per share); and finally, on a pari passu basis, the Series F, G, H, I, J and K Preffered Stock and the Common Stock will share equally on an as if converted to Common Stock basis.

ARTICLE VI.
CONDITIONS PRECEDENT

6.1Conditions to the Obligations of Parent and Merger Sub to Consummate the Merger.  The obligation of Parent and Merger Sub to consummate the Merger is subject to the satisfaction or written waiver by Parent, on or before the Closing, of the following conditions:

(a)The representations and warranties of the Company contained in Article III shall be true, complete and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

(b)The Company shall have performed and complied with all covenants agreements contained herein required to be performed or complied with by it prior to or at the Closing.

(c)The Company shall have obtained all necessary consents of and made all required filings with any governmental authority or agency required to be obtained prior to the Closing under applicable law and relating to the Merger.

(d)The Company shall have delivered to Parent (1) resolutions approved by the Board of Directors of the Company authorizing the Merger and such resolutions shall be in full force and effect at the time of Closing, (2) resolutions approved by the Company’s stockholders approving the Merger and such resolutions shall be in full force and effect at the time of Closing, and (3) a good standing certificate with respect to the Company from the Secretary of State of the State of Delaware dated a recent date before the Closing.

(e)No temporary restraining order, preliminary or permanent injunctions or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or provision challenging the Merger shall be in effect, nor shall any proceeding brought by an

13

administrative agency or commission or other governmental authority or instrumentality seeking any of the foregoing be pending.

(f)The asset purchase agreement between UFO Communications, Inc. and the Company identified on Exhibit B shall have been executed.

(g)The Company shall have $1,900,000 on deposit in a U.S. bank, shall have the executed Promissory Note of Paladin Capital to UFO Group, Inc. (for $200,000), and shall have the executed Promissory Note between UFO Communications, Inc. and the Company (for $950,000) immediately prior to the Merger.

(h)Parent, Merger Sub, the Company, UFO Communications, Inc., and Cogent Communications, Inc. (Cogent) and/or the stockholders of the Company (as applicable) shall have entered into a number of related agreements prior to or simultaneous with the execution of this Agreement, as listed on Exhibit B.

6.2Conditions to the Obligations of the Company.  The obligation of the Company to consummate the Merger is subject to the satisfaction, on or before the Closing, of the following conditions:

(a)The representations and warranties of Parent and Merger Sub contained in Article III shall be true, complete and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

(b)Parent and Merger Sub shall have performed and complied with all covenants and agreements contained herein required to be performed or complied with by them prior to or at the Closing.

(c)Parent and certain of its stockholders shall have executed and delivered (i) the Fourth Amended and Restated Stockholders Agreement in the form attached as Exhibit C (in form and substance substantially similar to the Existing Stockholders Agreement other than the addition of the holders of the Parent’s Series K Preferred Stock as parties thereto) and (ii) the Fifth Amended and Restated Registration Rights Agreement in the form attached as Exhibit D (in form and substance substantially similar to the Existing Registration Rights Agreement other than the addition of the holders of the Parent’s Series K Preferred Stock as parties thereto).

(d)Parent and Merger Sub, as the case may be, shall have obtained all necessary consents of and made all required filings with any governmental authority or agency or third party required to be obtained prior to the Closing under applicable law and relating to the consummation of the Merger and the other transactions contemplated hereby.

(e)The stockholders of Parent shall have approved an amendment to the certificate of incorporation of Parent providing that the issuance of the Series K Preferred Stock will not trigger anti-dilution rights set forth in the certificate of incorporation.  It is understood that this condition will be met if the stockholders have approved the amendment even though it

14

will not be effective until an information statement has been circulated and the amendment filed in Delaware.

(f)Stock certificates evidencing the Series K Preferred Stock shall have been prepared and available for issuance and delivery at the Closing.

(g)Parent shall have delivered to the Company (1) a copy of the Certificate of Designation certified by the Secretary of State of the State of Delaware, (2) resolutions approved by the Board of Directors of Parent and Merger Sub authorizing the Merger, the issuance of the Series K Preferred Stock and the issuance of Common Stock into which such Series K Preferred Stock is convertible and such resolutions shall be in full force and effect at the time of Closing, and (3) good standing certificates with respect to Parent and Merger Sub from the Secretary of State of the State of Delaware dated a recent date before the Closing.

(h)No temporary restraining order, preliminary or permanent injunctions or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or provision challenging the Merger and the other transactions contemplated hereby shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality seeking any of the foregoing be pending.

(i)Parent, Merger Sub, the Company, UFO Communications, Inc. and Cogent and/or the stockholders of the Company (as applicable) shall have entered into a number of related agreements prior to or simultaneous with the execution of this Agreement, as listed on Exhibit B.

ARTICLE VII.
TERMINATION AND LIQUIDATED DAMAGES

7.1Termination.  This Agreement may be terminated at any time prior to the Effective Time:

(a)By mutual written consent of Parent and the Company;

(b)By either the Company or Parent by providing written notice to the other if the Merger shall not have been consummated by the date which is 30 days from the date of this Agreement; provided further that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Merger to occur on or before such date;

(c)By either the Company or Parent by providing written notice to the other if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the Merger (each a “Restraint”), and such order, decree, ruling or other action shall have become final and non-appealable; provided, however, that the party seeking to terminate this Agreement pursuant to this Section 7.1(c) shall have used its reasonable best efforts to resist, resolve or lift, as applicable, such Restraint and to prevent such Restraint from becoming final and non-appealable.

15

7.2Effect of Termination.  In the event of termination of this Agreement by either the Company or Parent as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Merger Sub or the Company or their respective officers or directors, provided however, that Article V of this Agreement shall survive any such termination.  Notwithstanding the foregoing, nothing in this Section 7.2 shall be deemed to release any party from any liability for any willful breach of any representation, warranty, covenant or obligation contained in this Agreement.  This Section 7.2 shall survive any termination of this Agreement.

ARTICLE VIII.
GENERAL PROVISIONS

8.1Survival of Representations and Warranties; No Other Representations and Warranties.  The representations and warranties of Parent shall survive the Closing.  Each party hereto agrees that, except for the representations and warranties contained in this Agreement, none of the Company, Parent or Merger Sub makes any other representations or warranties, and each hereby disclaims any other representations and warranties made by itself or any of its stockholders, officers, directors, employees, agents, financial and legal advisors or other representatives, with respect to the execution and delivery of this Agreement, the documents and the instruments referred to herein, or the Merger or thereby, notwithstanding the delivery or disclosure to the other party or the other party’s representatives of any documentation or other information with respect to any one or more of the foregoing.

8.2Amendment.  This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of the Company and Parent, but, after any such approval, no amendment shall be made which by law or in accordance with the rules of the American Stock Exchange requires further approval by such stockholders without such further approval.  This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

8.3Extension; Waiver.  At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein.  Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party.  No delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.  Unless otherwise provided, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties hereto may otherwise have at law or in equity. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights.

16

8.4Notices.  Any notice, request, claim, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given if delivered personally, by facsimile transmission with receipt of delivery (one business day after confirmation in the case of transmissions to non-U.S. residents), or sent by registered or certified mail, postage prepaid, return receipt requested, or by internationally recognized overnight courier service (two business days after deposit with such overnight courier service in the case of deliveries to non-U.S. residents), as follows:

(a)if to Parent or Merger Sub, to:

Cogent Communications Group, Inc.
1015 31st Street
Washington, D.C 20007
Fax: (202) 342-8269
Attn: David Schaeffer

(b)if to the Company, to:

c/o Cogent Communications Group, Inc.
1015 31st Street
Washington, D.C 20007
Fax: (202) 342-8269
Attn: David Schaeffer

(c)if to the stockholders of the Company, to:

Kline Hawkes
11726 San Vicente Blvd.
Suite 300
Los Angeles, CA 90049

Paladin Capital
2001 Pennsylvania Avenue NW
Suite 400
Washington, DC 20006

UFO Communications, Inc.
[60 Federal Street, Suite 304
San Francisco, California, 94107

8.5Interpretation.  When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents, glossary of defined terms and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  The parties have participated jointly in the negotiation and drafting of this

17

Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden or proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.  Any reference to any federal, state, local or foreign statue or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the content requires otherwise.  It is understood and agreed that neither the specifications of any dollar amount in this Agreement nor the inclusion of any specific item in the Schedules or Exhibits is intended to imply that such amounts or higher or lower amounts, or the items so included or other items, are or are not material, and neither party shall use the fact of setting of such amounts or the fact of the inclusion of such item in the Schedules or Exhibits in any dispute or controversy between the parties as to whether any obligation, item or matter is or is not material for purposes hereof.

8.6Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart.

8.7Entire Agreement; Third Party Beneficiaries.  This Agreement (including the Schedules and Exhibits) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, other than.  This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, except for the provisions of Article 2, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

8.8Governing Law.  This Agreement shall be governed and construed in accordance with the laws of the State of New York, without regard to the laws that might be applicable under conflicts of laws principles.

8.9Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Merger is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the Merger are consummated as originally contemplated to the greatest extent possible.  Any provision of this Agreement held invalid or unenforceable only in part, degree or certain jurisdictions will remain in full force and effect to the extent not held invalid or unenforceable.  To the extent permitted by applicable law, each party waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect.

8.10Assignment.  Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether by operation of law or otherwise), without the prior written consent of the other parties, and any attempt to make any such assignment without such consent shall be null and void.  Subject to the

18

preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.

8.11Enforcement.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms.  It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity.

8.12Definitions.  As used in this Agreement:

(a)“Board of Directors” means the Board of Directors of any specified Person and any properly serving and acting committees thereof.

(b)“Organizational Documents” means, with respect to any entity, the certificate of incorporation, bylaws or other governing documents of such entity.

(c)“Person” means an individual, corporation, partnership, limited liability company association, trust, unincorporated organization, entity or group (as defined in the Exchange Act).

(d)“Subsidiary” when used with respect to any party means any corporation or other organization, whether incorporated or unincorporated, (i) of which such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting and economic interests in such partnership) or (ii) at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries.

(e)“the other party” means, with respect to the Company, Parent and means, with respect to Parent, the Company.

19

IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of August 12, 2004.

COGENT COMMUNICATIONS GROUP, INC.
By:	/s/ David Schaeffer
Name: David Schaeffer
Title: Chief Executive Officer
MARVIN INTERNET, INC.
By:	/s/ David Schaeffer
Name: David Schaeffer
Title: President
UFO GROUP, INC.
By:	/s/ Jay Ferguson
Name:
Title: President

EX-2.7

Exhibit 2.7

ASSET PURCHASE AGREEMENT

            THIS ASSET PURCHASE AGREEMENT (this Agreement) is made as of September 15, 2004 (the Effective Date) between Global Access Telecommunications, Inc., a Delaware corporation, (Seller), Symposium Gamma, Inc., a corporation organized under the laws of Delaware, (Purchaser) and Cogent Communications Group, Inc, a Delaware corporation (Parent).

I.          SALE AND PURCHASE OF ASSETS

             1.1.    Purchase and Sale of Assets.    Upon the terms and subject to the conditions of this Agreement, at the Closing, unless specifically excluded herein, Seller shall sell and assign to Purchaser and Purchaser shall purchase, acquire and accept all right, title and interest of Seller in, to and under all assets, properties and rights used or useful in the conduct of Seller’s business other than the Excluded Assets (as defined below) (collectively, the Assets), including those whereby Seller provides bandwidth enabled data services (Services) to customers (Customers), as follows:

             (a)   All of Seller’s right, title and interest in and to the supplier, Customer and other agreements and leases (Seller Contracts), listed on attached Schedule A, including the right to assert claims and take other rightful actions in respect of breaches, defaults and other violations of such contracts, arrangements, licenses, leases and other agreements;

             (b)   Originals or copies of all books, records, manuals and other materials (in any form or medium) relating to or used with the Seller Contracts (collectively, Books and Records), including any Customer contracts, price lists, correspondence, mailing lists, lists of Customers, distribution lists, photographs, sales and promotional materials and records, operating records, data books, intellectual property disclosures, media materials and plates, accounting records, sales order files and litigation files, operating, safety and maintenance manuals, peering agreements or arrangements, engineering design plans, blueprints and as-built plans, specifications, procedures, books of account, customer telephone numbers, addresses and other contact information, lock box account numbers, billing records and payment history, all regulatory filings and other similar items of Seller in connection with the provision of Service under the Seller Contracts;

             (c)   All Seller bank accounts related to Seller’s business and deposits (including those underlying any security or letter of credit arrangement) or prepayments made by Seller associated with the Seller Contracts;

             (d)   All accounts receivable arising from the Seller Contracts and all rights to collections of monies including previously written-off accounts, all Customer lockbox accounts and amounts received therein on and after midnight of the Closing Date and other forms of payment received after the Closing Date pursuant to a Seller Contract;

             (e)   All of the fixtures, machinery, equipment, fixed assets, furniture, tools, vehicles, maintenance equipment, computer hardware and other tangible personal property used or useful in the operation of Seller’s business or related to the Seller Contracts, including but not limited to those listed on attached Schedule B;

             (f)    Any leasehold improvements related to a Seller Contract;

             (g)   To the fullest extent legally transferable pursuant to applicable law, all of Seller’s intellectual property, if any, including, without limitation, all (i) inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof; (ii) registered and unregistered trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith; (iii) registered and unregistered copyrightable works and copyrights, and all applications,

registrations, and renewals in connection therewith; (iv) confidentiality, research, and license agreements, trade secrets and confidential business information (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer lists, pricing and cost information, and business and marketing plans and proposals to the extent that any of the foregoing constitute trade secrets or confidential information used in connection with the operation of the Assets); (v) intranet networks; (vi) copyrighted software owned by third parties and leased or licensed to any of Sellers; (vii) Internet Protocol (IP) space and IP addresses allocated or otherwise made available to Sellers by RIPE or any other third party; (viii) computer software or systems related to the Assets, including source codes, object codes, executable codes, databases and files referenced by the codes and all media containing the same and all relevant explanations, documentation, flowcharts, logic diagrams and rules for the source codes, in each case with respect to software that is owned by Seller; and (ix) copies and tangible embodiments of any of the foregoing (in whatever form or medium);

             (h)   To the fullest extent legally transferable pursuant to applicable law, the licenses, permits, franchises and other authorizations, if any, of any governmental entity relating to the operation of Seller’s business or the Seller Contracts;

             (i)    All of Seller’s claims, causes of action, litigation and other rights (including rights to refunds or credits) against all other persons, but only to the extent that the same arise out of or relate to the Assets as scheduled;

             (j)    All inventory of Seller; and

             (k)   All manufacturer warranties and similar rights in favor of Sellers with respect to any Asset.

             1.2.    Excluded Assets.    Notwithstanding the foregoing or anything to the contrary contained elsewhere in this Agreement, the following assets of Seller (the Excluded Assets) are not part of the sale and purchase contemplated hereunder, are excluded from the Assets and shall remain the property of Seller after the Closing:

             (a)   all minute books, stock records and corporate seals;

             (b)   shares of capital stock of Seller held in treasury;

             (c)   copies, of all records that Seller is required by law to retain in its possession,

             (d)   copies of all Seller or Seller affiliate accounting and tax records; and

             (e)   the rights of Seller under this Agreement and any agreement related to the transactions contemplated herein.

             1.3.    Assumption and Exclusion of Liabilities and Liens.    Subject to Section 1.4 and Section 1.6, at the Closing, unless specifically excluded herein, Purchaser shall assume and agree to discharge every Liability (as defined below) of Seller, incurred at any time, related to Seller’s business or the Assets, such Liabilities (the “Assumed Liabilities”) to be assumed and discharged by Purchaser to include, without limitation, the following:

             (a)   any Liability (including, without limitation, reserves and accrued liabilities, accounts payable and trade payables) reflected on the interim balance sheet of Seller as at July 31, 2004 (the Interim Balance Sheet) attached hereto at Schedule C-1 and described under the line item E (“Accruals”) or line item F (“Liabilities”);

             (b)   any Liability under any employment, severance, retention or termination agreement or any statutory or other severance or other obligations to employees of Seller (Employees),

2

regardless of whether such Employees transfer with the Assets pursuant to Section 613(a)-5 of the German Civil Code or elect not transfer with the Assets. Employees as of the Effective Date are listed on Schedule C-2.

             (c)   any Liability arising under the Seller Contracts; and

             (d)   any Liability incurred in the ordinary course of business since the date of the Interim Balance Sheet.

For purposes of this Agreement, “Liabilities” means, with respect to any person, any liability or obligation of such person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such person.

             1.4    Retained Liabilities.    Notwithstanding anything in Section 1.3 to the contrary and subject to Section 1.6, Purchaser shall not assume and agree to discharge, and Seller shall retain and be solely responsible for, the Liabilities listed on Schedule C-3, any employment, consulting or management agreement liabilities to Karsten Blue, Seller or any affiliate consulting agreement related to Seller or this transaction, Seller Liabilities regarding claims made within six (6) months of the Closing in respect of Seller Contracts not transferred to Purchaser as set forth in Section 1.6 below, any advances made to Seller by any Seller affiliate or parent, and any post Closing fees payable to any Seller agent or broker (the Retained Liabilities) and any Liability for Pre-Closing Taxes (as defined below).

For purposes of this Agreement, “Pre-Closing Taxes” means any Tax (as defined below) for any taxable period that ends on or before the Closing Date or, in the case of any Taxes that are payable for a taxable period that includes (but does not end on) the Closing Date, the portion of such Tax that is allocable (determined as provided below) to the portion of such taxable period ending on the Closing Date. “Tax” means any tax, assessment or charge imposed by any governmental authority of any nature including federal, state, local or foreign net income tax, alternative or add-on minimum tax, franchise tax, gross income, adjusted gross income or gross receipts tax, employment related tax (including employee withholding or employer payroll tax, FICA, or FUTA) ad valorem, transfer, license, excise, severance, stamp, occupation, premium, personal property, real property, capital stock, profits, disability, registration, value added, estimated, customs duties, and sales or use tax, together with any interest or any penalty, addition to tax or additional amount, whether disputed or not. For purposes of this provision, the term “Tax” shall not include any value added tax arising from the sale of assets under this Agreement, nor shall it include any value added tax, employee withholding or employer payroll tax or social security tax accrued in the normal course of business not yet due and payable. For purposes of this Agreement, in the case of any Taxes that are payable for a taxable period that includes (but does not end on) the Closing Date, the portion of such Tax that is allocable to the portion of such taxable period ending on the Closing Date shall (i) in the case of any property or ad valorem Taxes, be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in the entire taxable period, and (ii) in the case of any other Tax, be deemed equal to the amount which would be payable, computed on a “closing-of-the-books” basis as if the relevant taxable period ended at the close of business on the Closing Date.

             1.5    Purchase Price.    The purchase price for the Assets (the Purchase Price) shall consist of (i) Purchaser’s assumption of the Assumed Liabilities and (ii) 185.4 shares of Parent’s Series L Non-voting Convertible Preferred Stock (the Stock). Seller agrees that fifty percent (50%) of any common shares issued as a result of the conversion of the Stock into common stock of Parent will be

3

subject to an irrevocable assignment of the voting rights associated with such common shares to Parent for a period of five (5) years from the issuance of the Stock.

             1.6    Transfer of Seller Contracts.    Seller and Purchaser understand that Seller Contract consents, approvals, or waivers may be required under German law in order to effectuate a formal transfer of the Seller Contracts to Purchaser. However the parties understand that it is not certain that all Seller Contract customers or suppliers will consent to such transfers. Accordingly, after Closing, Purchaser covenants that its employees and/or transferred Employees will work diligently to obtain the consents required to transfer Seller Contracts to Purchaser, and Seller covenants that it will provide a representative(s) to work with Purchaser to obtain such consents. Inasmuch as Seller will have limited ability to perform Seller Contracts after Closing, and notwithstanding any other provision of this Agreement to the contrary, Purchaser shall assume and discharge all of the obligations of Seller under the Seller Contracts whether or not such Seller Contracts are transferred, and Purchaser shall enjoy the rights and benefits associated with such Seller Contracts. Notwithstanding anything in this Agreement to the contrary, with respect to those Seller Contracts for which (i) Purchaser is not able to obtain consents to transfer and (ii) Purchaser does not receive the benefits of such contracts following Closing, Seller shall continue to be responsible for a period of six (6) months following Closing for any Liabilities which relate to Seller performance or non-performance under either (x) Seller Contracts described on Schedule A as “Supplier and Membership Contracts” or “Leased Lines” and (y) any other Seller Contracts with respect to Liabilities arising from Seller’s performance or non-performance prior to Closing (such Liabilities referred to collectively as Pre-Closing Liabilities), and, if requested by Purchaser, Seller shall take the actions necessary to terminate such non-transferred Seller Contracts. Following such six (6) month period after Closing, in addition to all Assumed Liabilities which Purchaser agrees to assume and discharge after the Closing, Purchaser shall assume and discharge all Pre-Closing Liabilities. In connection with the foregoing, if Purchaser is unable to procure the consent of any holder of a Seller Contract to the transfer of such contract, Seller and Purchaser agree to work together in good faith to procure an alternative arrangement pursuant to which Purchaser would receive the benefits of such contract.

             1.7    Purchase Price Allocation.    Purchaser and Seller agree that as soon as practicable after the Closing they will cooperate in good faith to endeavor to prepare an allocation of the Purchase Price among the Assets in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury Regulations promulgated thereunder (the “Allocation”). Except as otherwise required by law, each of Purchaser, Parent and Seller agree to (i) be bound by any such Allocation, and (ii) act in accordance with any such Allocation in the preparation of financial statements and filing of all tax returns (including, without limitation, filing Form 8594 with their United States federal income tax return for the taxable year that includes the date of the Closing).

II.        THE CLOSING

             2.1.    Closing Date.    The Closing of the transactions contemplated herein (the Closing) shall take place at the offices of Parent or such other mutually designated location at 10:00 a.m. on a date mutually agreed that is no later than five (5) days following the satisfaction or waiver of the conditions to the Closing set forth in Section V (the Closing Date), and in any event is no later than September 17, 2004.

             2.2.    Transactions to be effected at the Closing.

             (a)    Deliveries by Seller.    At the Closing, in addition to the other items required to be delivered or performed hereunder, Seller shall deliver to Purchaser (i) a bill of sale for all of the Assets that are tangible personal property in the form of Schedule E.2.1 (the Bill of Sale) duly executed by Seller; (ii) an assignment of all of the Assets that are intangible personal property in the form of Schedule E.3.1, which assignment shall also contain Buyer’s undertaking and

4

assumption of the Assumed Liabilities (the Assignment and Assumption Agreement) duly executed by Seller and Parent; (iii) any items required to be delivered prior to Closing pursuant to Section 5.1 which have not yet been delivered; and (iv) such other documents or instruments reasonably requested by Purchaser or its agents to confirm or carry out Seller’s performance of the covenants and satisfaction of the conditions required by Seller by this Agreement and the documents contemplated hereby.

             (b)    Deliveries by Purchaser.    At the Closing, in addition to the other items required to be delivered or performed hereunder, Purchaser shall deliver to Seller (i) the Stock; (ii) The Assignment and Assumption Agreement duly executed by Purchaser; (iii) any items required to be delivered prior to Closing pursuant to Section 5.2 which have not yet been delivered; and (iv) such other documents or instruments reasonably requested by Seller or its agents to confirm or carry out Purchaser’s performance of the covenants and satisfaction of the conditions required of Purchaser by this Agreement and the documents contemplated hereby.

             2.3.    Assistance.    Seller shall provide reasonable assistance to Purchaser in providing any required notice to customers of Purchaser’s acquisition of the Seller Contracts and related information such as new points of contact and payment instructions.

III.       REPRESENTATIONS AND WARRANTIES

             3.1.    Representations and Warranties of Seller.    Seller hereby represents and warrants to Purchaser as follows:

             (a)    Organization, Standing and Power.    Seller is a Delaware corporation validly existing and in good standing, and has the requisite power and authority to carry on its business as now being conducted. Seller is duly licensed or qualified to do business in the jurisdictions where it is required to be so qualified or licensed.

             (b)    Authority.    Seller has the requisite legal power and authority to execute, deliver and perform its obligations under this Agreement and each of the agreements and other documents to be entered into by it at the Closing pursuant hereto (the Seller Ancillary Documents) and to consummate the transactions contemplated hereby and thereby to be consummated by it at the Closing. The execution and delivery of this Agreement and the Seller Ancillary Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of Seller. This Agreement has been, and at the Closing, each Seller Ancillary Document will be, duly executed and delivered by Seller. This Agreement constitutes, and at the Closing, each Seller Ancillary Document will constitute, the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms.

             (c)    Governmental Consents.    To the best of Seller’s knowledge, no consent, approval, license, permit, order or authorization of, or registration or filing with, or declaration of, any governmental authority (Consent) is required to be obtained or made by Seller in connection with the execution and delivery by Seller of this Agreement or the Seller Ancillary Documents to which it is a party or the consummation by Seller of the transactions contemplated hereby or thereby to be consummated by it at the Closing (a Seller Transaction Consent), except for (i) compliance with, and notices and filings under or with respect to the permits or laws relating thereto, (ii) Consents with respect to the Seller Contracts or its Ancillary Documents, (iii) filings with respect to taxes (including without limitation transfer taxes), (iv) those that may be required solely by reason of its participation in the transactions contemplated hereby, and (v) those the failure of which to obtain or make, individually or in the aggregate, would not materially impair its ability to perform its obligations under this Agreement and its Ancillary Documents.

5

             (d)    Compliance With Applicable Laws.    To the best of Seller’s knowledge, Seller is in compliance in all material respects with all laws and orders which are applicable to it in relation to the Assets. Seller has not (i) received any written notice alleging any non-compliance of the Assets in any material respect with any such laws or orders or (ii) received any written notice of any criminal or material administrative or civil investigation or audit by any governmental authority relating to the Assets, in each case which remains outstanding and unresolved.

             (e)    Title to Assets Without Liabilities, Except as Scheduled.    Upon the consummation of the transactions contemplated hereby, the Assets will be free and clear of and from any and liability or obligation of Seller, including any liens, except for the Assumed Liabilities and except for any liens listed on attached Schedule C.

             (f)    All Assets.    The Assets are all the assets used or useful in the conduct of Seller’s business, except that Seller makes no representation to Purchaser with respect to any personnel required for the conduct of Seller’s business. Seller refers Purchaser to the rights of Employees to reject transfer pursuant to their rights under Section 613a of the German Civil Code.

             (g)    Schedules.    The Schedules attached hereto which have been prepared by Seller are materially accurate and complete.

             (h)    Prepayments and Deposits.    Except as set forth on attached Schedule G, No customer has prepaid for more than one month of service and no customer has given Seller any deposit subject to return to that customer under any Seller Contract.

             (i)    Material Adverse Change Regarding Assets.    As of the Closing, there has been no material adverse change regarding the Assets since July 31, 2004 as reflected in the documentation provided for Purchaser’s review of Seller’s information concerning the Assets.

             (j)    Material Adverse Change Regarding Liabilities.    As of the Closing, there has been no material adverse change regarding the Liabilities of Seller since July 31, 2004 as set forth in the documentation provided for Purchaser’s review of Seller’s information concerning the liabilities as of that date, including but not limited to the Assumed and Excluded Liabilities.

             (k)    No Knowledge.    Neither Seller nor any of its representatives has any actual knowledge of any breach or potential breach of any representation or warranty or the inaccuracy of any representation, made by any of the Purchaser or any of its representatives.

Each of the representations and warranties in this Section 3.1, and any disclosure schedules attached to this Agreement, shall be deemed to disclose in qualification thereof, any facts, circumstances, conditions or events actually known prior to the Closing Date, by Parent or Purchaser or any of their representatives.

             3.2.    Representations and Warranties of Purchaser.    Purchaser hereby represents and warrants to Seller as follows:

             (a)    Organization, Standing and Power.    Purchaser is a corporation validly existing and in good standing under the laws of Delaware, and has the requisite power and authority to carry on its business as now being conducted. Purchaser is duly licensed or qualified to do business in the jurisdictions where it is required to be so qualified or licensed.

             (b)    Authority; Absence of Conflicts.    Purchaser has the requisite power and authority to execute, deliver and perform its obligations under this Agreement and the agreements and other documents to be entered into by it at the Closing pursuant hereto (the Purchaser Ancillary Documents) and to consummate the transactions contemplated hereby and thereby to be consummated by it at the Closing. The execution and delivery of this Agreement and the Purchaser Ancillary Documents and the consummation of the transactions contemplated hereby

6

and thereby have been duly authorized by all necessary corporate action on the part of Purchaser and will not require the approval of the shareholders of Purchaser. This Agreement has been, and at the Closing, each Purchaser Ancillary Document will be, duly executed and delivered by Purchaser. This Agreement constitutes, and at the Closing, each of the Purchaser Ancillary Documents will constitute, the legal, valid and binding obligation of Purchaser, enforceable against it in accordance with its terms.

             (c)    Consents.    To the best of Purchaser’s knowledge, no consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any governmental authority is required to be obtained or made by or with respect to Purchaser in connection with the execution and delivery of this Agreement or the Purchaser Ancillary Documents or the consummation of the transactions contemplated hereby or thereby to be consummated by Purchaser at the Closing (a Purchaser Transaction Consent).

             (d)    No Knowledge.    Neither Purchaser nor any of its representatives has any actual knowledge of any breach or potential breach of any representation or warranty or the inaccuracy of any representation, made by any of the Seller or any of its representatives.

Each of the representations and warranties in this Section 3.2, and any disclosure schedules attached to this Agreement, shall be deemed to disclose in qualification thereof, any facts, circumstances, conditions or events actually known prior to the Closing Date, by Seller or any of its representatives.

             3.3.    Representations and Warranties of Parent.    Except as set forth in the Parent Disclosure Schedule attached hereto as Schedule H (the Parent Disclosure Schedule, Parent represents and warrants to the Seller as follows:

             (a)    Organization, Good Standing and Qualification.    Parent 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. Purchaser is a wholly-owned indirect subsidiary of Parent.

             (b)    Authorization.    Parent has all requisite corporate power and corporate authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by Parent of this Agreement and the consummation by Parent of the transactions contemplated hereby, including, without limitation, the filing of the Certificate of Designation, as defined herein, by Parent and the issuance of the Stock have been, and immediately before the date that Stock becomes convertible the reservation for issuance of all Conversion Shares (as defined below) issuable upon conversion of the Stock will have been, duly authorized by all necessary corporate action on the part of Parent and no further consent or authorization is required by Parent or its board of directors or stockholders. This Agreement has been duly executed and delivered by Parent and constitutes a valid and binding agreement of Parent, 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).

             (c)    Parent Capitalization.

             (i)    Immediately prior to the Closing and without giving effect to the transaction contemplated hereby the Parent will have a total authorized capitalization consisting of:

600,000,000 shares of common stock, par value $.001 (the Common Stock) of which (a) 16,145,918 shares are issued and outstanding, (b) 1,432,872 shares remain reserved for issuance pursuant to stock purchase, stock grant or stock option arrangements for employees, directors or consultants of the Parent, (c) 155,809 shares remain reserved for

7

issuance to holders of shares of the common stock of Allied Riser, (d) 21,329 remain reserved for issuance upon the conversion of Allied Riser convertible notes, (e) 103,777 shares remain reserved for issuance pursuant to warrants granted in connection with certain agreements between Allied Riser and certain landlords relating to building access rights, (f) 68,199,901 shares are reserved for issuance upon conversion of the Series F Participating Convertible Preferred Stock of Parent (the Series F Preferred Stock), (g) 254,947,501 shares are reserved for issuance upon conversion of the Series G Participating Convertible Preferred Stock of Parent (the Series G Preferred Stock), (h) 61,541,611 shares are reserved for issuance upon conversion of the Series H Participating Convertible Preferred Stock of Parent (the Series H Preferred Stock), (i) 15,962,585 shares are reserved for issuance upon conversion of the Series I Participating Convertible Preferred Stock of Parent (the Series I Preferred Stock), (j) 120,605,177 shares are reserved for issuance upon conversion of the Series J Participating Convertible Preferred Stock of Parent (the Series J Preferred Stock), and (k) 16,119,033 shares are reserved for issuance upon conversion of the Series K Participating Convertible Preferred Stock of Parent (the Series K Preferred Stock).

170,000 shares of the Parent’s preferred stock, $.001 par value per share (the Preferred Stock), of which (a) 24,478 shares are authorized but unissued Preferred Stock, (b) 11,000 shares are designated as Series F Preferred Stock, all of which are issued and outstanding, (c) 41,030 shares are designated as Series G Preferred Stock, all of which are issued and outstanding, (d) 84,001 shares are designated as Series H Preferred Stock, of which 47,308 shares are issued and outstanding and, (e) 3,000 shares are designated as Series I Preferred Stock, of which 2,575 shares are issued and outstanding, (f) 3,891 shares are designated as Series J Preferred Stock, of which 3,891 shares are issued and outstanding and (g) 2,600 shares are designated Series K Preferred Stock, of which 2,600 shares are issued and outstanding.

             (ii)   All the outstanding shares of capital stock of the Parent have been duly authorized, and are validly issued, fully paid and non-assessable and were issued in compliance with all applicable state and federal laws concerning the issuance of securities. The Series L Preferred Stock, when issued and delivered in accordance with the terms hereof, will be (i) duly authorized, validly issued, fully-paid and non-assessable, (ii) free from all taxes, liens and charges with respect to the issuance thereof and (iii) entitled to the rights and preferences set forth in the Certificate of Designation. Such shares of Common Stock issuable upon conversion of the Stock, when issued and delivered upon conversion of any of the Stock (the Conversion Shares), will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Immediately before the date that the Series L Preferred Stock become convertible, there shall have been reserved, free of preemptive rights and other preferential rights, a sufficient number of authorized but unissued shares of Common Stock to satisfy the conversion rights of the holders of the Series L Preferred Stock.

             (iii)  Except pursuant to the Parent’s 2004 Incentive Award Plan, no options, warrants, subscriptions, convertible securities, phantom stock, stock appreciation rights or other rights (contingent or otherwise) of any nature to acquire from the Parent shares of capital stock or other securities are authorized, issued or outstanding, nor is the Parent obligated in any other manner to issue shares of its capital stock or other securities except as contemplated by this Agreement. There are no restrictions on the transfer of shares of capital stock of the Parent other than those imposed by relevant federal and state securities laws and as otherwise contemplated by this Agreement, the Parent’s Third Amended and Restated Stockholders Agreement (the Existing Stockholders Agreement) and the Parent’s Fourth Amended and

8

Restated Registration Rights Agreement (the Existing Registration Rights Agreement). To Parent’s knowledge, the Existing Stockholders Agreement sets forth the only agreements among stockholders regarding voting rights and obligations applicable to Parent’s securities. The Existing Registration Rights Agreement sets forth the only registration rights and obligations applicable to the Parent’s securities.

             (d)    No Conflicts, Preemptive rights or Rights of First Refusal.

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

result in a violation of the certificate of incorporation or bylaws of Parent;

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 Parent or any Subsidiary of Parent 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);

result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of Parent or any Subsidiary of Parent other than a lien on the additional assets of Purchaser pursuant to Parent’s secured credit facility with Cisco Credit Corporation; or

result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the American Stock Exchange) applicable to Parent or any Subsidiary of Parent or by which any property or asset of Parent or any Subsidiary of Parent is bound or affected.

             (ii)   Except for the filing of the Certificate of Designation with the Secretary of State of the State of Delaware, Parent 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.

             (iii)  The issuance of the Stock is not, and subsequent to the conversion of the Stock into the Conversion Shares will not be, subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.

             (e)    Legal Proceedings.    Except as disclosed in the SEC Filings (as defined below), there is no material legal or governmental proceeding pending or threatened or contemplated to which Parent is or may be a party or of which the business or property of Parent is or may be subject that would have a material adverse effect on the business or financial condition of Parent.

9

             (f)    No Violations.    Except as disclosed in the SEC Filings, Parent 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 Parent, which violation, individually or in the aggregate, would have a material adverse effect on the business or financial condition of Parent, or in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or any other agreement or instrument to which Parent is a party or by which Parent is bound or by which the properties of Parent are bound or affected.

             (g)    Governmental Permits, Etc.    Except as disclosed in the SEC Filings, Parent 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 Parent as currently conducted, the absence of which would have a material adverse effect on the business or operations of Parent.

             (h)    Financial Statements.    Except as disclosed in the SEC Filings, the financial statements of Parent and the related notes, provided to the Company by Parent (the Financial Statements), present fairly the financial position of Parent as of the dates indicated therein and its results of operations and cash flows for the periods therein specified. The Financial Statements (including the related notes) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods therein specified. The Financial Statements are identical in all material respects to the financial statements that will be contained in Parent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

             (i)    Additional Information.

             (i)    Parent has filed in a timely manner all documents that Parent was required to file 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 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:

             Parent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003; and all other documents, if any, filed by Parent with the Securities and Exchange Commission (the SEC) since the filing of the Annual Report on Form 10-K for the fiscal year ended December 31, 2003, including Parent’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2004, and pursuant to the reporting requirements of the Exchange Act.

             (ii)   As of their respective dates, the financial statements of Parent included in the SEC Filings 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 Parent as of the dates thereof and the consolidated results

10

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, Parent 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 Parent. Without limiting the foregoing, except as specified in the SEC Filings, Parent 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 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.

             (j)    No General Solicitation.    Neither Parent, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Stock.

             (k)    No Integrated Offering.    Neither Parent, nor any of its affiliates, nor any person acting on its or their 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 Stock under the Securities Act or cause this offering of the Stock to be integrated with prior offerings by Parent 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 Parent or any of its subsidiaries take any action or steps that would require registration of the Stock under the Securities Act or cause the offering of the Stock to be integrated with other offerings.

             (l)    Internal Accounting Controls.    Parent 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 generally accepted accounting principles 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.

             (m)    Private Placement.    The offer, sale and issuance of the Series L Non-voting Convertible Preferred Stock as contemplated by this Agreement is exempt from the registration requirements of the Securities Act and all applicable state securities laws.

             (n)    Corporate Documents.    The Certificate and Bylaws of the Parent are in the form provided to Seller.

             (o)    No Knowledge.    Neither Parent nor any of its representatives has any actual knowledge of any breach or potential breach of any representation or warranty or the inaccuracy of any representation, made by any of the Seller or any its representatives.

             (p)    Anti-Dilution Adjustments.    The issuance of the Series L Preferred Stock does not, and, assuming filing of the Carve-Out Amendment (as defined in Section 5.2(d)] below) with the Secretary of State of the State of Delaware, the subsequent conversion of the Series L Preferred

11

Stock into Common Stock will not, trigger any anti-dilution rights or other similar conversion price adjustments with respect to any securities of Parent.

             (q)    Related-Party Transactions.    No employee, officer, stockholder or director of Parent or its subsidiaries or member of his or her immediate family is indebted to Parent or any of its subsidiaries, nor is Parent indebted (or committed to make loans or extend or guarantee credit) to any of them, other than (i) for payment of salary for services rendered, (ii) for reimbursement for reasonable expenses incurred on behalf of Parent, (iii) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of Parent), (iv) as disclosed in the Parent Disclosure Schedule or (v) disclosed in the SEC Filings. Except as disclosed in the SEC Filings, to the best of Parent’s knowledge, none of such persons has any direct or indirect ownership interest in any firm or corporation with which Parent is affiliated or with which Parent has a business relationship, or any firm or corporation that competes with Parent, except that employees, stockholders, officers, or directors of Parent and members of their immediate families may own stock in publicly traded companies that may compete with Parent. Except as disclosed in the SEC Filings, to the best of Parent’s knowledge, no officer, director, or stockholder or any member of their immediate families is, directly or indirectly, interested in any material contract with Parent or any of its subsidiaries (other than such contracts as relate to any such person’s ownership of capital stock or other securities of Parent).

             3.4.    Reliance on Representations and Warranties    Each of Purchaser and Parent acknowledges that it enters into this Agreement and agrees to consummate the transactions contemplated hereby in sole reliance on the express representations and warranties contained in this Agreement and not upon any other information furnished to Purchaser or Parent by Seller or any other person. EACH OF PURCHASER AND PARENT ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, SELLER MAKES NO REPRESENTATION OR WARRANTY CONCERNING THE ASSETS, INCLUDING AS TO THE QUALITY, CONDITION, MERCHANTABILITY, SALABILITY, OBSOLESCENCE, WORKING ORDER OR FITNESS FOR A PARTICULAR PURPOSE THEREOF, INCLUDING AS TO THE ASSIGNABILITY OF SELLER CONTRACTS, AND EXCEPT AS EXPRESSLY SET FORTH HEREIN, PURCHASER IS PURCHASING THE ASSETS “AS IS AND WHERE IS.”

             3.5.    Survival of Representations and Warranties.    The representations and warranties of Parent shall survive the Closing and a period of three (3) years thereafter... The representations and warranties of Seller and Purchaser shall survive the Closing and a period of six (6) months thereafter.

IV.      COVENANTS

             4.1.    Covenants if Closing is Delayed.    The parties intend to do a simultaneous Closing and execution of this Agreement. Should such events not occur simultaneously, Seller agrees to the following:

             (a)    Conduct of Business.    During the period from the date of this Agreement and continuing until the Closing, Seller shall not do any of the following with respect to the Assets, except as expressly provided in this Agreement, in the ordinary course of business or to the extent that Purchaser shall otherwise consent in writing: (i) sell, lease or mortgage, pledge or otherwise dispose of any of the Assets; (ii) amend or modify any of the Assets; (iii) sign any new or modify any existing material commitments, contracts, or agreements, or enter into any material liabilities; or (iv) agree, whether in writing or otherwise, to do any of the foregoing.

             (b)    Access to Information.    Seller shall afford to Purchaser and its accountants, counsel and other representatives reasonable access during normal business hours during the period prior to the Closing to all the properties, books, records, contracts, and commitments of the Seller relating to the Assets.

12

             (c)    Prompt Closing.    Subject to the terms and conditions of this Agreement, each party shall use its commercially reasonable efforts to cause the Closing to occur as promptly as practicable.

             4.2.    Expenses.    Whether or not the Closing takes place, and except as otherwise specifically provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses.

             4.3.    Brokers or Finders.

             (a)   Purchaser represents, as to itself and its affiliates, that no agent, broker, investment banker or other person is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, and Purchaser agrees to indemnify and hold Seller harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or expenses asserted by any person on the basis of any act or statement alleged to have been made by Purchaser or its affiliates.

             (b)   Seller represents, as to itself and its affiliates, that no agent, broker, investment banker or other person is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement, other than to Mummert & Company, a portion of which fee has already been paid by Seller and a portion of which shall be paid by Seller after Closing pursuant to an engagement letter between Seller and Mummert & Company, and Seller agrees to indemnify and hold Purchaser harmless from and against any and all claims, liabilities or obligations with respect to any other fees, commissions or expenses asserted by any person on the basis of any act or statement alleged to have been made by Seller or its affiliates.

             4.4.    Additional Agreements.    After the Closing, each of Purchaser, Parent and Seller, at their own expense, promptly will execute and deliver or cause to be executed and delivered to or as directed by the requesting party such assignments, deeds, bills of sale, agreements, consents and other instruments of transfer, assignment or assumption required pursuant to this Agreement and take such further and other actions as Purchaser or its counsel or Seller or its counsel may reasonably request as necessary or desirable in order to effect or further evidence the implementation of the sale and assignment of the Assets and the Seller Contracts to Purchaser as specified in Section 1.1, the assumption of the Assumed Liabilities as specified in Section 1.3 and in order to carry out the purposes and intent of this Agreement and the Ancillary Documents.

             4.5.    Notice of Developments.    Seller shall notify Purchaser in writing of any developments not in the ordinary course of business that occur relating to the Assets or Seller’s Liabilities up through the Closing Date. Such notices shall be supplied no less than once a week, or at any time a development has occurred which reasonably could be viewed as having a value or liability of $10,000 or more.

             4.6    Notice Under Section 613a.    Purchaser shall be responsible for the notification of Employees with respect to the transaction contemplated under this Agreement in accordance with applicable law, including, without limitation, Section 613a of the German Civil Code.

             4.7    Tax Reporting.    Each of Purchaser, Parent and Seller agrees that for United States federal income tax purposes, it will report the transactions contemplated hereby as a taxable asset purchase and sale and not as a disposition of property in a distribution or transfer described in Section 381(a) of the Code.

V.        CONDITIONS PRECEDENT

             5.1.    Conditions to Obligation of Purchaser.    The obligation of Purchaser to purchase the Assets and to perform its other covenants hereunder required to be performed on or after the Closing is

13

subject to the satisfaction at and as of the Closing, or waiver by Purchaser in writing, of each of the following conditions:

             (a)    Representations and Warranties.    The representations and warranties of Seller set forth in Section 3.1 of this Agreement shall be true and correct in all material respects as of immediately prior to the Closing as though made at and as of immediately prior to the Closing exactly as written herein (including references therein to “the date of this Agreement”, “the date hereof” or the like, or any other specified date), except for changes permitted or contemplated by this Agreement.

             (b)    Performance of Obligations of Seller.    Seller shall have performed or complied in all material respects with all obligations, conditions and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing.

             (c)    Related Agreements.    Seller shall have executed and delivered the related Agreements listed on attached Schedule E.

             (d)   The Seller shall have delivered to Purchaser resolutions duly approved by the Board of Directors of the Seller authorizing the transactions contemplated hereby and in full force and effect at the time of Closing.

             5.2.    Conditions to Obligation of Seller.    The obligations of Seller to sell the Assets and to perform their other covenants hereunder required to be performed on or after the Closing is subject to the satisfaction, at and as of the Closing, or waiver by Seller in writing, of each of the following conditions:

             (a)    Representations and Warranties.    The representations and warranties of Purchaser set forth in Section 3.2 of this Agreement and Parent set forth in Section 3.3 shall be true and correct in all material respects as of immediately prior to the Closing as though made at and as of the Closing exactly as written herein (including references therein to “the date of this Agreement”, “the date hereof” or the like, or to any other specified date), except for changes permitted or contemplated by this Agreement.

             (b)    Performance of Obligations of Purchaser and Parent.    Each of Purchaser and Parent shall have performed or complied in all material respects with all obligations, conditions and covenants required to be performed or complied with by it under this Agreement at or prior to the Closing.

             (c)   Parent and certain of its stockholders as applicable shall have executed and delivered (i) an acceptance to the instrument of accession attached as Schedule II to the Fourth Amended and Restated Stockholders Agreement attached hereto as Schedule E.1.1, and (ii) the Sixth Amended and Restated Registration Rights Agreement in form and substance substantially similar to the Existing Registration Rights Agreement attached hereto as Schedule E.1.2, other than the addition of the holders of the Series L Preferred Stock as parties thereto.

             (d)   The stockholders of Parent shall have approved an amendment to the certificate of incorporation of Parent providing that the issuance of the Series L Preferred Stock will not trigger anti-dilution rights set forth in the certificate of incorporation. It is understood that this condition will be met if the stockholders have approved the amendment even though it will not be effective until an information statement has been circulated and the amendment filed in Delaware.

             (e)   Stock certificates evidencing the Series L Preferred Stock shall have been prepared and available for issuance and delivery at the Closing.

             (f)    Parent shall have delivered to the Seller (1) a copy of the Certificate of Designation, certified by the Secretary of State of the State of Delaware, and (2) resolutions approved by the Board of Directors of Parent authorizing the transactions contemplated hereby, the issuance of the

14

Series L Preferred Stock and the issuance of common stock into which such Series L Preferred Stock is convertible and such resolutions shall be in full force and effect at the time of Closing.

             (g)   Purchaser shall have delivered to the Seller resolutions approved by the Board of Directors of Purchaser authorizing the transactions contemplated hereby.

VI.       TERMINATION, AMENDMENT AND WAIVER; INDEMNIFICATION

             6.1.    Termination.

             (a)   Notwithstanding anything to the contrary in this Agreement, this Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing:

             (i)    by mutual written consent of Seller and Purchaser;

             (ii)   by Seller if any of the conditions set forth in Section 5.2 shall have not been fulfilled within ten (10) days of the date of this Agreement or become incapable of fulfillment, and shall not have been waived in writing by Seller, provided, however, that the right to terminate this Agreement under this Section 6.1(a)(ii) shall not be available to Seller if the failure of Seller to fulfill or comply with any of its obligations under this Agreement shall have been the reason that such condition to Closing shall not have been satisfied on or prior to the Closing Date;

             (iii)  by Purchaser if any of the conditions set forth in Section 5.1 shall have not been fulfilled within ten (10) days of the date of this Agreement or become incapable of fulfillment, and shall not have been waived in writing by Purchaser, provided, however, that the right to terminate this Agreement under this Section 6.1(a)(iii) shall not be available to the Purchaser if its failure to fulfill or comply with any of its obligations under this Agreement shall have been the reason that such condition to Closing shall not have been satisfied on or prior to the Closing Date;

provided, however, that the party seeking termination pursuant to clause (ii) or (iii) is not in breach in any material respect of any of its representations, warranties, covenants or agreements contained in this Agreement.

             (b)   If the transactions contemplated by this Agreement are terminated as provided herein, (i) each of Parent and Purchaser shall return or destroy all documents and copies and other materials of a proprietary nature received by it or its representatives from or on behalf of the Seller or its representatives relating to transactions contemplated hereby, whether so obtained before or after the execution hereof, to the Seller and (ii) all Information (as defined in the Confidentiality Agreement between Seller and Parent) received by Parent, Purchaser or their respective representatives with respect to the Seller or its affiliates shall be treated in accordance with the Confidentiality Agreement, which shall remain in full force and effect in accordance with its terms for a period of three (3) years from the date of the Confidentiality Agreement, notwithstanding the termination of this Agreement.

             (c)   If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in this Section 6.1, this Agreement shall become null and void and of no further force and effect, except for the provisions of (i) this Agreement relating to expenses (including Section 4.2), (ii) Section 4.3 relating to finder’s fees and broker’s fees, and (iii) this Section 6.1. Nothing herein shall be deemed to release any party hereto from any liability for any breach, prior to termination of this Agreement, by such party of its obligations or covenants under this Agreement.

             6.2.    Amendments and Waivers.    This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. By an instrument in writing Purchaser, on the

15

one hand, or Seller, on the other hand, may waive compliance by Seller, or by Purchaser, respectively, with any term or provision of this Agreement that such party was or is obligated to comply with or perform.

             6.3.    Claims for Indemnification.

             (a)   From and after the Closing, Purchaser and Parent shall indemnify and save and hold harmless Seller and its officers, directors, employees, agents, partners, representatives, subsidiaries, affiliates and permitted successors and assigns from and against, and promptly reimburse for, any and all loss, damage, cost, expense (including court costs and reasonable attorneys’ fees), fine, penalty, suit, action or claim (collectively, Losses) caused by or arising from any claims of third parties arising from (i) Assumed Liabilities, (ii) any breach by Parent of any representation, warranty or covenant of Parent hereunder, (iii) failure to provide notification to Employees with respect to the transaction contemplated under this Agreement in accordance with applicable law, including, without limitation, Section 613a of the German Civil Code, and (iv) any failure by Purchaser to discharge its obligations under the Seller Contracts in accordance with Section 1.6 above, provided, however, the aggregate amount required to be paid by Purchaser and Parent pursuant to this Section 6.3(b) shall not exceed $927,000, and none of Seller or any other person otherwise entitled to indemnity under this Section 6.3(b) shall have any right to recover from Purchaser and Parent for any Losses exceeding such amount.

             (b)   From and after the Closing, the Seller shall indemnify and save and hold harmless each of Purchaser and Parent and their respective officers, directors, employees, agents, partners, representatives, subsidiaries, affiliates and permitted successors and assigns from and against, and promptly reimburse for, any and all Losses caused by or arising from any claims of third parties arising from (i) Retained Liabilities, (ii) any breach by Seller of any representation or warranty of Seller hereunder, and (iii) any failure by Seller to discharge its obligations under the Seller Contracts in accordance with Section 1.6 above; provided, however, the aggregate amount required to be paid by Seller pursuant to this Section 6.3(b) shall not exceed $927,000, and none of Purchaser, Parent or any other person otherwise entitled to indemnity under this Section 6.3(b) shall have any right to recover from Seller for any Losses exceeding such amount; provided, further, in the event Seller shall be subject to liability under this Section 6.3(b), Seller shall have the option to satisfy such liability either by cash payment or payment in Stock (or the shares into which the Stock is converted) based upon the Stock’s Primary Liquidation Preference value pursuant to the Certificate of Designation..

             6.4.    Defense of Third-party Claims.    With respect to each third-party claim subject to Section 6.3 (a “Third-party Claim”), the party seeking indemnification (the “Indemnified Party”) shall give prompt notice to the Indemnifying Party of the Third-party Claim, provided that failure to give such notice promptly shall not relieve or limit the obligations of the Indemnifying Party except to the extent the Indemnifying Party is prejudiced thereby. The Indemnifying Party, at its sole cost and expense, may, upon notice of the Third-party Claim, assume the defense of the Third-party Claim. If it assumes the defense of a Third-party Claim, then the Indemnifying Party shall select counsel reasonably satisfactory to the Indemnified Party to conduct the defense. The Indemnifying Party shall not consent to a settlement of, or the entry of any judgment arising from, any Third-party Claim, unless (i) the settlement or judgment is solely for money damages and Indemnifying Party admits in writing its liability to hold the Indemnified Party harmless from and against any losses, damages, expense and liabilities arising out of such settlement or (ii) the Indemnified Party consents thereto, which consent shall not be unreasonably withheld and, in the case of either clause (i) or clause (ii), the settlement contains an unconditional release of the Indemnified Party with respect to the Third-party Claim from each Person asserting such claim and does not contain an admission of fault on the part of the Indemnified Party. The Indemnifying Party shall provide the Indemnified Party with fifteen (15) days prior notice before it consents to a

16

settlement of, or the entry of a judgment arising from, any Third-party Claim. The Indemnified Party shall be entitled to participate in the defense of any Third-party Claim, the defense of which is assumed by the Indemnifying Party, with its own counsel and at its own expense. With respect to Third-party Claims in which the remedy sought is not solely money damages, (i) the Indemnifying Party shall, upon notice to the Indemnified Party within fifteen (15) days after Parent receives notice of the Third-party Claim, be entitled to participate in the defense with its own counsel at its own expense and (ii) the Indemnified Party shall not consent to any settlement of, or entry of any judgment arising from, such Third-party Claim unless the Indemnifying Party consents thereto, which consent shall not be unreasonably withheld. If the Indemnifying Party does not elect to assume or participate in the defense of any Third-party Claim in accordance with the terms of this Section, then the Indemnifying Party shall be bound by the results obtained by the Indemnified Party with respect to the Third-party Claim. The parties shall cooperate in the defense of any Third-party Claim and the relevant records of each party shall be made available on a timely and reasonable basis.

             6.5    Acknowledgment Regarding Series K Preferred Stock.

             Parent agrees that, for purposes of clarification of the Secondary Liquidation Preference of the Series L Preferred Stock in the Certificate of Designations of the Series L Preferred Stock, the use of the term “Senior Stock—Secondary” is a place holder that would allow Parent to issue in the future a series of preferred stock with a liquidation preference that was junior to the Series L Preferred Stock primary liquidation preference but senior to the Series L secondary liquidation preference. Parent agrees that there are no currently outstanding shares of Senior Stock—Secondary that are distinct from the shares of Pari Passu Stock—Primary and that the use of the term Senior Stock—Secondary does not entitle the Series F, G, I, J and K Preferred Stock to double their primary liquidation preference. Thus, Parent agrees that, immediately following the sale of Assets contemplated thereby, the relative ranking (in terms of liquidation preference) of the outstanding shares of preferred stock of Parent will be as follows: first, on a pari passu basis, the shares of Series F, G, I, J, K and L Preferred Stock will receive their primary liquidation preference (an amount equal to one times their respective original purchase prices); second, on a pari passu basis, the shares of Series G, I, J, K and L Preferred Stock will receive their secondary liquidation preference (an amount equal to two times their respective original purchase prices) and the Series H Preferred Stock will receive its primary liquidation preference (an amount equal to $161 per share); third, the Series F Preferred Stock will receive its secondary liquidation preference (an amount equal to $1,647.0883 per share); and finally, on a pari passu basis, the Series F, G, H, I, J, K and L Preferred Stock and the Common Stock will share equally on an as if converted to Common Stock basis.

VII.     GENERAL PROVISIONS

             7.1.    Notices.    All notices and other communications hereunder shall be in writing (including telecopy or similar writing) and shall be sent, delivered or mailed, addressed or telecopied:

Purchaser	Seller
Symposium Gamma, Inc. c/o Cogent Communications Group, Inc. 1015 31st Street, NW Washington, DC 20007 Parent Cogent Communications Group, Inc. 1015 31st Street, NW Washington, D.C. 20007	Global Access Telecommunications, Inc. c/o General Atomics 3550 General Atomics Court San Diego, CA 92121 Attention: David E. Christensen, Deputy General Counsel

17

Each such notice or other communication shall be given by (i) hand delivery, (ii) nationally recognized courier service, or (iii) telecopy, receipt confirmed, and immediately followed by U.S. mail. Each such notice or communication shall be effective (i) if delivered by hand or by nationally recognized courier service against receipt therefor, when delivered at the address specified herein (or in accordance with the latest unrevoked direction from such party) and (ii) if given by telecopy, when such telecopy is transmitted to the telecopy number specified herein (or in accordance with the latest unrevoked direction from such party), and confirmation is received.

             7.2.    Interpretation.

             (a)   When a reference is made in this Agreement to a Section, Schedule or Exhibit, such reference shall be to a Section of, or a Schedule or Exhibit to, this Agreement unless otherwise indicated.

             (b)   The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

             (c)   Any matter set forth in any disclosure Schedule shall be deemed set forth in all other disclosure Schedules to the extent relevant.

             (d)   This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted.

             7.3.    Severability.    If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion thereof) or the application of such provision to any other persons or circumstances.

             7.4.    Counterparts.    This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (including by telecopy) to the other party.

             7.5.    Entire Agreement.    This Agreement including its Schedules, the Exhibits, the Sellers Ancillary Documents and the Purchaser Ancillary Documents constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.

             7.6.    Applicable law and Jurisdiction.    Except as otherwise specifically provided herein, this Agreement (and all documents, instruments and agreements executed and delivered pursuant to the terms and provisions hereof) shall be governed by and construed and enforced in accordance with the laws of the New York without giving effect to the principles of conflicts of laws. Each party hereto agrees that such dispute or other matters may be heard in the United States District Court for the State of New York and the parties hereto hereby irrevocably submit to the jurisdiction of such courts in any such action or proceeding and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding.

             7.7.    Disclaimer.    In connection with Parent’s and Purchaser’s investigation of the Seller and its business, each of Parent and Purchaser has received from or on behalf the Seller certain projections and certain business plan information for the periods presented therein. Each of Parent and Purchaser acknowledges that there are uncertainties inherent in attempting to make such estimates, projections and other forecasts and plans, that each of Parent and Purchaser is familiar with such uncertainties, that each of Parent and Purchaser is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections and other forecasts and plans so furnished to it (including the reasonableness of the assumptions underlying such estimates, projections and other

18

forecasts) and each of Parent and Purchaser shall have no claim against the Seller or any of its affiliates with respect thereto. Accordingly, the Seller make no representation or warranty with respect to such estimates, projections and other forecasts and plans (including the reasonableness of the assumptions underlying such estimates, projections and forecasts).

             7.8.    Further Assurances.    In case at any time after the Closing any further action is reasonably necessary to carry out the purposes of this Agreement, the proper officers of the Seller, Purchaser and Parent shall take any such reasonably necessary action.

[Signature Page to Follow]

19

        IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above.

SELLER: GLOBAL ACCESS TELECOMMUNICATIONS, INC.
By	/s/  JOHN E. JONES
Name:	John E. Jones
Title:	Vice President
PURCHASER: SYMPOSIUM GAMMA, INC.
By	/s/  DAVID SCHAEFFER
Name:	David Schaeffer
Title:	Chief Executive Officer
PARENT: COGENT COMMUNICATIONS GROUP, INC.
By	/s/  DAVID SCHAEFFER
Name:	David Schaeffer
Title:	Chief Executive Officer

20

EX-2.8

Exhibit 2.8

AGREEMENT AND PLAN OF MERGER

DATED AS OF OCTOBER 26, 2004

AMONG

COGENT COMMUNICATIONS GROUP, INC.,

COGENT POTOMAC, INC.

AND

NVA ACQUISITION, INC.

TABLE OF CONTENTS

ARTICLE I. THE MERGER		1
1.1	The Merger	1
1.2	Closing	2
1.3	Effective Time	2
1.4	Effects of the Merger	2
1.5	Certificate of Incorporation	2
1.6	Bylaws	2
1.7	Officers and Directors of Surviving Corporation	2
1.8	Tax Consequences	2
ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES		2
2.1	Effect on Capital Stock	2
ARTICLE III. REPRESENTATIONS AND WARRANTIES		3
3.1	Representations and Warranties of the Company	3
3.2	Representations and Warranties of Parent	4
ARTICLE IV. COVENANTS RELATING TO CONDUCT OF BUSINESS		10
4.1	Covenants of the Company	10
4.2	Covenants of Parent and Merger Sub	10
ARTICLE V. ADDITIONAL AGREEMENTS		10
5.1	Claims for Indemnification	10
5.2	Exculpation	11
5.3	Defense of Third-party Claims	11
5.4	Survival	12
5.5	Tax and Accounting Treatment	12
5.6	Further Assurances	12
ARTICLE VI. CONDITIONS PRECEDENT		12
6.1	Conditions to the Obligations of Parent and Merger Sub to Consummate the Merger	12
6.2	Conditions to the Obligations of the Company	13
ARTICLE VII. TERMINATION		14
7.1	Termination	14

i

7.2	Effect of Termination	15
ARTICLE VIII. GENERAL PROVISIONS		15
8.1	Survival of Representations and Warranties; No Other Representations and Warranties	15
8.2	Amendment	15
8.3	Extension; Waiver	15
8.4	Notices	16
8.5	Interpretation	16
8.6	Counterparts	17
8.7	Entire Agreement; Third Party Beneficiaries	17
8.8	Governing Law	17
8.9	Severability	17
8.10	Assignment	17
8.11	Enforcement	17
8.12	Definitions	17

ii

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER, dated as of October 26, 2004 (this “Agreement”), by and among COGENT COMMUNICATIONS GROUP, INC., a Delaware corporation (“Parent”), COGENT POTOMAC, INC., a Delaware corporation and a wholly-owned Subsidiary of Parent (“Merger Sub”), and NVA ACQUISITION, INC., a Delaware corporation (the “Company”).

W I T N E S S E T H :

WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have each determined that the Merger (as defined below) is in the best interests of their respective stockholders and have approved the Merger upon the terms and subject to the conditions set forth in this Agreement, whereby each issued and outstanding share of Common Stock, par value $.01 per share, of the Company (“Company Common Stock”), will be converted into the right to receive one share of non-voting Series M Participating Convertible Preferred Stock, par value $.001 per share, of Parent (the “Series M Preferred Stock”);

WHEREAS, in order to effectuate the foregoing, Merger Sub, upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the “DGCL”), will merge with and into the Company (the “Merger”);

WHEREAS, the Company has acquired substantially all of the assets from Aleron Broadband Services LLC, a Nevada limited liability company, and Dial Access Services, LLC, a Delaware limited liability company (collectively, the “Target Companies”) used in its business (the “Acquisition”);

WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger; and

WHEREAS, for United States Federal income tax purposes it is intended that the Merger qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”);

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I.
THE MERGER

1.1The Merger.  Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 251 of the DGCL, Merger Sub shall be merged with and into the Company at the Effective Time (as defined below).  Following the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation (the “Surviving Corporation”) in accordance with the DGCL.

1

1.2Closing.  The closing of the Merger (the “Closing”) will take place on the date all the conditions set forth in Article IV of this Agreement have been satisfied or waived, or if not, as soon as practicable after satisfaction or waiver (as permitted by this Agreement and applicable law) of the conditions (excluding conditions that, by their terms, cannot be satisfied until the Closing Date) set forth in Article VI (the “Closing Date”), unless another time or date is agreed to in writing by the parties hereto.  The Closing shall be held at the offices of Latham & Watkins LLP, 555 11^th Street N.W., Washington, D.C., unless another place is agreed to in writing by the parties hereto.

1.3Effective Time.  Upon the Closing, the parties shall file with the Secretary of State of the State of Delaware a certificate of merger or other appropriate documents (in any such case, the “Certificate of Merger”) executed in accordance with the relevant provisions of the DGCL and shall make all other filings, recordings or publications required under the DGCL in connection with the Merger.  The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Delaware Secretary of State and the applicable Series M Preferred Stock shall have been issued to the holders of the Company Common Stock, or at such other time as the parties may agree and specify in the Certificate of Merger (the time the Merger becomes effective being the “Effective Time”).

1.4Effects of the Merger.  At and after the Effective Time, the Merger will have the effects set forth in Section 259 of the DGCL.

1.5Certificate of Incorporation.  The certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.  The name of the Surviving Corporation shall be Cogent Potomac, Inc.

1.6Bylaws.  The bylaws of Merger Sub as in effect at the Effective Time shall be the bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.

1.7Officers and Directors of Surviving Corporation.  The officers and directors of Merger Sub shall be the officers and directors of the Surviving Corporation until the earlier of their resignation or removal or otherwise ceasing to be an officer or director or until their respective successors are duly elected and qualified, as the case may be.

1.8Tax Consequences.  It is intended by the parties hereto that the Merger qualify as a reorganization described in Section 368(a) of the Code.  The parties hereto adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3 of the United States Income Tax Regulations.

ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES

2.1Effect on Capital Stock.  As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock or any shares of capital stock of Merger Sub:

2

(a)Capital Stock of Merger Sub.  Each issued and outstanding share of capital stock of Merger Sub shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation.

(b)Cancellation of Treasury Stock and Parent-Owned Stock.  Each share of Company Common Stock that is owned by the Company or by a wholly owned subsidiary of the Company and each share of Company Common Stock that is owned by Parent, Merger Sub or any other wholly owned subsidiary of Parent shall automatically be canceled and retired and shall cease to exist, and no Series M Preferred Stock or other consideration shall be delivered in exchange therefor.

(c)Conversion of Company Common Stock.  Each issued and outstanding share of Company Common Stock (other than shares to be canceled in accordance with Section 2.1(b)) shall automatically be converted into the right to receive one fully paid and nonassessable share of Series M Preferred Stock.  As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive upon the surrender of such certificates, certificates representing the shares of Series M Preferred Stock.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

3.1Representations and Warranties of the Company.  The Company hereby represents and warrants to Parent and Merger Sub as follows:

(a)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.

(b)Authorization.  The Company has all requisite corporate power and corporate authority to enter into this Agreement and to consummate the Merger and the other transactions contemplated hereby.  The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger have been duly authorized by all necessary corporate action on the part of the Company.  This Agreement has been duly executed and delivered by the Company and 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).

(c)Capitalization.  The authorized capital stock of the Company consists, or will consist, immediately prior to the closing, of 4,000 shares of Company Common Stock, of which the number of shares set forth in Exhibit A of the Stock Purchase Agreement, as defined

3

herein, are issued and outstanding.  All of the issued and outstanding shares of Company Common Stock were validly issued and are fully paid and nonassessable.

(d)No subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase or acquire any shares of capital stock of the Company is authorized or outstanding, (ii) the Company has no obligation (contingent or otherwise) to issue any subscription, warrant, option, convertible security or other such right or to issue or distribute to holders of any shares of its capital stock any evidences of indebtedness or assets of the Company or any of its subsidiaries, and (iii) the Company has no obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof.

(e)There are no agreements, written or oral, between the Company and any holder of its capital stock, or among any holders of its capital stock, relating to the acquisition (including without limitation rights of first refusal or preemptive rights), disposition, registration under the Securities Act of 1933, as amended (the “Securities Act”), or voting of the capital stock of the Company.

(f)Subsidiaries.  The Company does not own or control, directly or indirectly, any interest in any other corporation, association, or other business entity.

(g)Corporate Documents.  The Certificate and Bylaws of the Company are in the form provided to counsel for the stockholders of the Company.

3.2Representations and Warranties of Parent.  Except as set forth in the Parent Disclosure Schedule delivered by Parent to the Company at or prior to the execution of this Agreement (the “Parent Disclosure Schedule”), Parent represents and warrants to the Company as follows:

(a)Organization, Good Standing and Qualification.  Parent and Merger Sub are corporations duly organized, validly existing and in good standing under the laws of Delaware and each has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted.

(b)Authorization.  Each of Parent and Merger Sub has all requisite corporate power and corporate authority to enter into this Agreement and to consummate the Merger and the other transactions contemplated hereby.  The execution, delivery and performance by each of Parent and Merger Sub of this Agreement and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby, including, without limitation, the filing of the Certificate of Designation, as defined herein, by Parent and the issuance of the Series M Preferred Stock have been, and immediately before the date that the Series M Preferred Stock become convertible the reservation for issuance of all Conversion Shares (as defined below) issuable upon conversion of the Series M Preferred Stock will have been, duly authorized by all necessary corporate action on the part of Parent and Merger Sub and no further consent or authorization is required by Parent or Merger Sub or their respective boards of directors or stockholders.  This Agreement has been duly executed and delivered by Parent and Merger Sub and constitutes a valid and binding agreement of Parent and Merger Sub, enforceable against

4

each of them 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).

(c)Parent Capitalization.

(i)Immediately prior to the Closing and without giving effect to the Merger the Parent will have a total authorized capitalization consisting of:

(A)600,000,000 shares of common stock, par value $.001 (the “Common Stock”) of which (a) 16,338,992 shares are issued and outstanding, (b) 1,432,872 shares remain reserved for issuance pursuant to stock purchase, stock grant or stock option arrangements for employees, directors or consultants of the Parent, (c) 155,809 shares remain reserved for issuance to holders of shares of the common stock of Allied Riser, (d) 21,329 remain reserved for issuance upon the conversion of Allied Riser convertible notes, (e) 103,777 shares remain reserved for issuance pursuant to warrants granted in connection with certain agreements between Allied Riser and certain landlords relating to building access rights, (f) 68,199,901 shares are reserved for issuance upon conversion of the Series F Participating Convertible Preferred Stock of Parent (the “Series F Preferred Stock”), (g) 254,942,365 shares are reserved for issuance upon conversion of the Series G Participating Convertible Preferred Stock of Parent (the “Series G Preferred Stock”), (h) 61,348,462 shares are reserved for issuance upon conversion of the Series H Participating Convertible Preferred Stock of Parent (the “Series H Preferred Stock”), (i) 15,962,585 shares are reserved for issuance upon conversion of the Series I Participating Convertible Preferred Stock of Parent (the “Series I Preferred Stock”), (j) 120,605,177 shares are reserved for issuance upon conversion of the Series J Participating Convertible Preferred Stock of Parent (the “Series J Preferred Stock”), (k) 16,119,033 shares are reserved for issuance upon conversion of the Series K Participating Convertible Preferred Stock of Parent (the “Series K Preferred Stock”) and 5,747,055 shares are reserved for issuance upon conversion of the Series L Participating Convertible Preferred Stock of Parent (the “Series L Preferred Stock”).

(B)170,000 shares of the Parent’s preferred stock, $.001 par value per share (the “Preferred Stock”), of which (a) 20,292 shares are authorized but unissued Preferred Stock, (b) 11,000 shares are designated as Series F Preferred Stock, all of which are issued and outstanding, (c) 41,030 shares are designated as Series G Preferred Stock, all of which are issued and outstanding, (d) 84,001 shares are designated as Series H Preferred Stock, of which 46,499 shares are issued and outstanding, (e) 3,000 shares are designated as Series I Preferred Stock, of which 2,575 shares are issued and outstanding, (f) 3,891 shares are designated as Series J Preferred Stock, of which 3,891 shares are issued and outstanding, (g) 2,600 shares are designated Series K Preferred Stock, of which 2,600 shares are issued and outstanding, (h) 185.4 shares are designated Series L Preferred Stock, of which 185.4 shares are issued and outstanding, and (i) 4,000 shares are designated Series M Preferred Stock, of which 0 shares are issued and outstanding.

(ii)All the outstanding shares of capital stock of the Parent have been duly authorized, and are validly issued, fully paid and non-assessable and were issued in

5

compliance with all applicable state and federal laws concerning the issuance of securities.  The Series M Preferred Stock, when issued and delivered in accordance with the terms hereof, will be (i) duly authorized, validly issued, fully-paid and non-assessable, (ii) free from all taxes, liens and charges with respect to the issuance thereof and (iii) entitled to the rights and preferences set forth in the Certificate of Designation.  Such shares of Common Stock issuable upon conversion of the Series M Preferred Stock, when issued and delivered upon conversion of any of the Series M Preferred Stock (the “Conversion Shares”), will be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock.  Immediately before the date that the Series M Preferred Stock become convertible, there shall have been reserved, free of preemptive rights and other preferential rights, a sufficient number of authorized but unissued shares of Common Stock to satisfy the conversion rights of the holders of the Series M Preferred Stock.

(iii)Except pursuant to the Parent’s 2004 Incentive Award Plan and as otherwise disclosed herein, no options, warrants, subscriptions, convertible securities, phantom stock, stock appreciation rights or other rights (contingent or otherwise) of any nature to acquire from the Parent shares of capital stock or other securities are authorized, issued or outstanding, nor is the Parent obligated in any other manner to issue shares of its capital stock or other securities except as contemplated by this Agreement. There are no restrictions on the transfer of shares of capital stock of the Parent other than those imposed by relevant federal and state securities laws and as otherwise contemplated by this Agreement, the Parent’s Fourth Amended and Restated Stockholders Agreement (the “Existing Stockholders Agreement”) and the Parent’s Sixth Amended and Restated Registration Rights Agreement (the “Existing Registration Rights Agreement”).

(d)No Conflicts.

(i)The execution, delivery and performance of this Agreement by Parent and the Merger Sub, the performance by Parent and Merger Sub of their respective obligations hereunder and the consummation by Parent and Merger Sub of the transactions contemplated hereby will not:

(A)result in a violation of the certificate of incorporation or bylaws of either Parent or Merger Sub;

(B)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 Parent, Merger Sub or any Subsidiary of Parent 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);

6

(C)result in the creation or imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of Parent, Merger Sub or any Subsidiary of Parent other than a lien on the stock of Merger Sub pursuant to Parent’s secured credit facility with Cisco Credit Corporation; or

(D)result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the American Stock Exchange) applicable to Parent, Merger Sub or any Subsidiary of Parent or by which any property or asset of Parent, Merger Sub or any Subsidiary of Parent is bound or affected.

(ii)Except for the filing of the Certificate of Designation with the Secretary of State of the State of Delaware, neither Parent nor Merger Sub is 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.

(e)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 Parent, threatened or contemplated to which Parent is or may be a party or of which the business or property of Parent is or may be subject.

(f)No Violations.  Except as disclosed in the SEC Filings, Parent 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 Parent, which violation, individually or in the aggregate, would have a material adverse effect on the business or financial condition of Parent, 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 Parent is a party or by which Parent is bound or by which the properties of Parent are bound or affected.

(g)Governmental Permits, Etc.  Except as disclosed in the SEC Filings, Parent 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 Parent as currently conducted, the absence of which would have a material adverse effect on the business or operations of Parent.

(h)Financial Statements.  Except as disclosed in the SEC Filings, the financial statements of Parent and the related notes, provided to the Company by Parent (the “Financial Statements”), present fairly the financial position of Parent as of the dates indicated therein and its results of operations and cash flows for the periods therein specified. The Financial Statements (including the related notes) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods therein specified.  The Financial Statements are identical in all material respects to the financial

7

statements that are contained in Parent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

(i)Additional Information.

(i)Except as disclosed in the Parent Disclosure Schedule, Parent has filed in a timely manner all documents that Parent 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 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)Parent’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003; and

(B)all other documents filed by Parent with the Securities and Exchange Commission (the “SEC”) since the filing of the Annual Report on Form 10-K for the fiscal year ended December 31, 2003, including Parent’s Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 2004 and June 30, 2004, and pursuant to the reporting requirements of the Exchange Act.

(ii)As of their respective dates, the financial statements of Parent included in the SEC Filings 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 Parent 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, Parent 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 Parent.  Without limiting the foregoing, except as specified in the SEC Filings, Parent has no material liabilities or obligations that would reasonably be expected to be disclosed in order to comply with Section 13(j) of the

8

Exchange 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.

(j)No General Solicitation.  Neither Parent, nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Series M Preferred Stock.

(k)No Integrated Offering.  Neither Parent, nor any of its affiliates, nor any person acting on its or their 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 Series M Preferred Stock under the Securities Act or cause this offering of the Series M Preferred Stock to be integrated with prior offerings by Parent 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 Parent or any of its subsidiaries take any action or steps that would require registration of the Series M Preferred Stock under the Securities Act or cause the offering of the Series M Preferred Stock to be integrated with other offerings.

(l)Internal Accounting Controls.  Parent 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 generally accepted accounting principles 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.

(m)Private Placement.  The offer, sale and issuance of the Series M Preferred Stock as contemplated by this Agreement is exempt from the registration requirements of the Securities Act and all applicable state securities laws.

(n)Merger Sub Business Activities.  Merger Sub is not a party to any material agreements and has not conducted any activities other than in connection with the organization of Merger Sub, the negotiation and execution of this Agreement and the consummation of the Merger.  Merger Sub has no Subsidiaries.

(o)Corporate Documents.  The Certificate and Bylaws of the Parent are in the form provided to counsel for the stockholders of the Company.

(p)Tax Treatment.  The Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).

9

ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS

4.1Covenants of the Company.  The Company agrees and covenants to use its best efforts to cause the consummation of the Merger and further agrees and covenants not to take any action that is inconsistent with its obligations under this Agreement in any material respect that could reasonably be expected to hinder or delay the consummation of the Merger.

4.2Covenants of Parent and Merger Sub.

(a)Certificate of Designation.  Prior to the Closing, the Parent shall file with the Secretary of State of the State of Delaware a certificate of designation in the form set forth on Exhibit A hereto setting forth the rights and preferences of the holders of Series M Preferred Stock (the “Certificate of Designation”).

(b)Other Actions.  Parent and Merger Sub agree and covenant to use their best efforts to cause the consummation of the Merger and further agree and covenant not to take any action that is inconsistent with their obligations under this Agreement in any material respect that could reasonably be expected to hinder or delay the consummation of the Merger.

(c)Reservation of Conversion Shares.  From and after the Closing and for so long as any shares of Series M Preferred Stock are outstanding, Parent covenants and agrees to continue to reserve, free of preemptive rights and other preferential rights, a sufficient number of its previously authorized but unissued shares of its Common Stock to satisfy the rights of conversion of the holders of the Series M Preferred Stock.

(d)Additional Post-Closing Covenants. Parent and Merger Sub shall use their respective best endeavors to procure, as promptly as possible after Closing, that the certificate of incorporation of Parent be amended to amend the terms of each sub-series of Series G Preferred Stock and Series H Preferred Stock to provide that the issuance of the Series M Preferred Stock or the conversion of such shares into Common Stock shall not be deemed an issuance of “Additional Shares of Common Stock” or otherwise result in a change in the Conversion Price of such preferred stock as that term is defined in the respective Certificates of Designations, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions (the “Carve-out Amendment”).

ARTICLE V.
ADDITIONAL AGREEMENTS

5.1Claims for Indemnification.

(a)Parent shall indemnify and hold harmless, prior to the Merger, each holder of Company Common Stock, and following the Merger, each holder of Series M Preferred Stock, and such holder’s respective officers, directors, employees, agents, partners, representatives, subsidiaries, affiliates and permitted successors and assigns from and against, and promptly reimburse for, any and all loss, diminution in value, damage, cost, expense (including court costs and reasonable attorneys’ fees and costs of investigation), fine, penalty, suit, action, claim, deficiency, liability or obligation (collectively, “Losses”) caused by or arising

10

from (i) any breach by Parent or Merger Sub of any representation, warranty or other provision set forth in this Agreement, (ii) any and all claims of third parties made based upon facts alleged that, if true, would constitute any breach set forth in clause (i) above, or (iii) any claims by third parties relating to the Acquisition or the Merger.

(b)The representations, warranties, covenants and agreements contained in this Agreement shall not be affected by any party hereto or by anyone on behalf of any such party: (i) investigating, verifying or examining any matters with respect to Parent or Merger Sub or the transactions contemplated hereby; (ii) having the opportunity to investigate, verify or examine any matters related to Parent or Merger Sub or the transactions contemplated hereby; or (iii) failing to determine or discover any facts which were determinable or discoverable by any such party.  All rights contained in this Agreement are cumulative and are in addition to all other rights and remedies that are otherwise available pursuant to the terms of this Agreement or applicable law.

5.2Exculpation.  Parent and Merger Sub agree with the Company that each of Parent and Merger Sub and their agents, advisors, assigns, and successors, as applicable, fully and generally agree to waive, release, remise, acquit, and discharge prior to the Merger, each holder of Company Common Stock and after the Merger, each holder of Series M Preferred Stock and each of their affiliates and their respective present or former officers, directors, partners, joint ventures and successors and assigns (collectively, the “Releasees”) and covenant not to sue or otherwise institute or cause to be instituted or in any way participate in (except at the request of the applicable Releasee) any legal or other proceedings or actions against any Releasee with respect to any matter whatsoever arising out of or relating to this Agreement, including, but not limited to any and all liabilities, claims, demands, contracts, debts, obligations, and causes of action of every nature, kind and description, in law, equity, or otherwise, whether or not now known or ascertained, which heretofore do, or hereafter may, exist.  This Section 5.2 shall not apply to any fraudulent act by a Releasee or with respect to a breach of any representation, warranty or other provision of the Company set forth in this Agreement.

5.3Defense of Third-party Claims.  With respect to each third-party claim subject to Section 5.1 (a “Third-party Claim”), the party seeking indemnification (the “Indemnified Party”) shall give prompt notice to Parent of the Third-party Claim, provided that failure to give such notice promptly shall not relieve or limit the obligations of Parent except to the extent Parent is prejudiced thereby.  Parent, at its sole cost and expense, may, upon notice of the Third-party Claim, assume the defense of the Third-party Claim.  If it assumes the defense of a Third-party Claim, then Parent shall select counsel reasonably satisfactory to the Indemnified Party to conduct the defense.  Parent shall not consent to a settlement of, or the entry of any judgment arising from, any Third-party Claim, unless (i) the settlement or judgment is solely for money damages and Parent admits in writing its liability to hold the Indemnified Party harmless from and against any losses, damages, expense and liabilities arising out of such settlement or (ii) the Indemnified Party consents thereto, which consent shall not be unreasonably withheld and, in the case of either clause (i) or clause (ii), the settlement contains an unconditional release of the Indemnified Party with respect to the Third-party Claim from each Person asserting such claim and does not contain an admission of fault on the part of the Indemnified Party.  Parent shall provide the Indemnified Party with fifteen (15) days prior notice before it consents to a settlement of, or the entry of a judgment arising from, any Third-party Claim.  The Indemnified

11

Party shall be entitled to participate in the defense of any Third-party Claim, the defense of which is assumed by Parent, with its own counsel and at its own expense.  With respect to Third-party Claims in which the remedy sought is not solely money damages, (i) Parent shall, upon notice to the Indemnified Party within fifteen (15) days after Parent receives notice of the Third-party Claim, be entitled to participate in the defense with its own counsel at its own expense and (ii) the Indemnified Party shall not consent to any settlement of, or entry of any judgment arising from, such Third-party Claim unless Parent consents thereto, which consent shall not be unreasonably withheld.  If Parent does not elect to assume or participate in the defense of any Third-party Claim in accordance with the terms of this Section, then Parent shall be bound by the results obtained by the Indemnified Party with respect to the Third-party Claim.  The parties shall cooperate in the defense of any Third-party Claim and the relevant records of each party shall be made available on a timely and reasonable basis.

5.4Survival.  All representations, warranties, covenants and agreements of Parent and the Company contained herein shall survive the execution and delivery of this Agreement and the consummation of the Merger and the other transactions contemplated hereby.

5.5Tax and Accounting Treatment.  Each of Parent, Merger Sub and the Company shall not take any action and shall not fail to take any action which action or failure to act would prevent, or would be likely to prevent, the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.  Amounts paid with respect to indemnity claims under this Agreement or amounts paid pursuant to Section 7.3 of this Agreement shall be increased to the extent of any increase in tax liability that is imposed on the party receiving such amounts (including any increase thereof resulting from the application of this sentence).

5.6Further Assurances.  In case at any time after the Effective Time any further action is reasonably necessary to carry out the purposes of this Agreement, the proper officers of the Company, Parent and Merger Sub shall take any such reasonably necessary action.

ARTICLE VI.
CONDITIONS PRECEDENT

6.1Conditions to the Obligations of Parent and Merger Sub to Consummate the Merger.  The obligation of Parent and Merger Sub to consummate the Merger is subject to the satisfaction or written waiver by Parent, on or before the Closing, of the following conditions:

(a)The representations and warranties of the Company contained in Article III shall be true, complete and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

(b)The Company shall have performed and complied with all covenants agreements contained herein required to be performed or complied with by it prior to or at the Closing.

(c)The Company shall have duly executed and delivered that certain asset purchase agreement (the “Asset Purchase Agreement”) with the Target Companies, a form of

12

which is attached hereto as Exhibit B, pursuant to which the Company acquired all the assets of Target Companies for an aggregate purchase price as specified therein.

(d)The Company shall have duly executed and delivered that certain stock purchase agreement (the “Stock Purchase Agreement”) with certain Purchasers (as that term is defined in the Stock Purchase Agreement), a form of which is attached hereto as Exhibit C, pursuant to which the Company issued all of its authorized and issued common stock to the Purchasers for an aggregate purchase as specified therein.

(e)The Company shall have obtained all necessary consents of and made all required filings with any governmental authority or agency or third party required to be obtained prior to the Closing under applicable law and relating to the Merger and the other transactions contemplated hereby.

(f)The Company shall have delivered to Parent (1) resolutions approved by the Board of Directors of the Company authorizing the Merger and other transactions contemplated hereby and in full force and effect at the time of Closing, (2) resolutions approved by the Company’s stockholders approving the Merger and in full force and effect at the time of Closing, and (3) a good standing certificate with respect to the Company from the Secretary of State of the State of Delaware dated a recent date before the Closing.

(g)No temporary restraining order, preliminary or permanent injunctions or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or provision challenging the Merger shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality seeking any of the foregoing be pending.

6.2Conditions to the Obligations of the Company.  The obligation of the Company to consummate the Merger is subject to the satisfaction, on or before the Closing, of the following conditions:

(a)The representations and warranties of Parent and Merger Sub contained in Article III shall be true, complete and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the Closing.

(b)Parent and Merger Sub shall have performed and complied with all covenants and agreements contained herein required to be performed or complied with by them prior to or at the Closing.

(c)Parent and certain of its stockholders shall have executed and delivered (i) the Fifth Amended and Restated Stockholders Agreement in form and substance substantially similar to the Existing Stockholders Agreement other than the elimination of certain Common Stock holders from the definition of Purchasers as that term is defined therein, the addition of the holders of the Parent’s Series M Preferred Stock as parties thereto and the addition of Kenneth Peterson as a director of Parent as designated by Columbia Venture Corporation and (ii) the Seventh Amended and Restated Registration Rights Agreement in form and substance

13

substantially similar to the Existing Registration Rights Agreement other than the addition of the holders of the Parent’s Series M Preferred Stock as parties thereto.

(d)Parent and Merger Sub, as the case may be, shall have obtained all necessary consents of and made all required filings with any governmental authority or agency or third party required to be obtained prior to the Closing under applicable law and relating to the consummation of the Merger and the other transactions contemplated hereby.

(e)The stockholders of Parent shall have approved the Carve-out Amendment.  It is understood that this condition will be met if the stockholders have approved the Carve-out Amendment even though it will not be effective until an information statement has been circulated and the Carve-out Amendment filed in Delaware.

(f)Parent shall have delivered to the Company (1) a copy of the Certificate of Designation, certified by the Secretary of State of the State of Delaware, (2) resolutions approved by the Board of Directors of Parent and Merger Sub authorizing the Merger and other transactions contemplated hereby and in full force and effect at the time of Closing, and (3) good standing certificates with respect to Parent and Merger Sub from the Secretary of State of the State of Delaware dated a recent date before the Closing.

(g)No temporary restraining order, preliminary or permanent injunctions or other order issued by any court of competent jurisdiction or other legal or regulatory restraint or provision challenging the Merger and the other transactions contemplated hereby shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality seeking any of the foregoing be pending.

(h)Latham & Watkins LLP shall have delivered an opinion regarding the authorization and issuance of the Series M Preferred Stock and certain other matters to the Company and each of the Holders of the Company Common Stock in form and substance reasonably acceptable to such holders.

ARTICLE VII.
TERMINATION

7.1Termination.  This Agreement may be terminated at any time prior to the Effective Time:

(a)By mutual written consent of Parent and the Company;

(b)By either the Company or Parent by providing written notice to the other if the Merger shall not have been consummated by the date which is 30 days from the date of this Agreement; provided further that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Merger to occur on or before such date;

(c)By either the Company or Parent by providing written notice to the other if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the Merger (each a “Restraint”), and

14

such order, decree, ruling or other action shall have become final and non-appealable; provided, however, that the party seeking to terminate this Agreement pursuant to this Section 7.1(c) shall have used its reasonable best efforts to resist, resolve or lift, as applicable, such Restraint and to prevent such Restraint from becoming final and non-appealable.

7.2Effect of Termination.  In the event of termination of this Agreement by either the Company or Parent as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Merger Sub or the Company or their respective officers or directors.  Notwithstanding the foregoing, nothing in this Section 7.2 shall be deemed to release any party from any liability for any willful breach of any representation, warranty, covenant or obligation contained in this Agreement.  This Section 7.2 shall survive any termination of this Agreement.

ARTICLE VIII.
GENERAL PROVISIONS

8.1Survival of Representations and Warranties; No Other Representations and Warranties.  The representations and warranties of Parent shall survive the Closing.  Each party hereto agrees that, except for the representations and warranties contained in this Agreement, none of the Company, Parent or Merger Sub makes any other representations or warranties, and each hereby disclaims any other representations and warranties made by itself or any of its officers, directors, employees, agents, financial and legal advisors or other representatives, with respect to the execution and delivery of this Agreement, the documents and the instruments referred to herein, or the Merger or thereby, notwithstanding the delivery or disclosure to the other party or the other party’s representatives of any documentation or other information with respect to any one or more of the foregoing.

8.2Amendment.  This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Merger by the stockholders of the Company and Parent, but, after any such approval, no amendment shall be made which by law or in accordance with the rules of the American Stock Exchange requires further approval by such stockholders without such further approval.  This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

8.3Extension; Waiver.  At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein.  Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party.  No delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other

15

right, power or privilege hereunder.  Unless otherwise provided, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that the parties hereto may otherwise have at law or in equity. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights.

8.4Notices.  Any notice, request, claim, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given if delivered personally, by facsimile transmission with receipt of delivery (one business day after confirmation in the case of transmissions to non-U.S. residents), or sent by registered or certified mail, postage prepaid, return receipt requested, or by internationally recognized overnight courier service (two business days after deposit with such overnight courier service in the case of deliveries to non-U.S. residents), as follows:

(a)if to Parent or Merger Sub, to:

Cogent Communications Group, Inc.
1015 31st Street
Washington, D.C 20007
Fax: (202) 342-8269
Attn: David Schaeffer

(b)if to the Company, to:

NVA Acquisition, Inc.
c/o Cogent Communications Group, Inc.
1015 31st Street
Washington, D.C 20007
Fax: (202) 342-8269
Attn: Robert N. Beury, Jr.

8.5Interpretation.  When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents, glossary of defined terms and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  The parties have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden or proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.  Any reference to any federal, state, local or foreign statue or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the content requires otherwise.  It is understood and agreed that neither the specifications of any dollar amount in this Agreement nor the inclusion of any specific item in the Schedules or Exhibits is intended to imply that such amounts or higher or lower amounts, or the items so included or other items, are or are not material, and neither party shall use the fact of setting of such amounts or the fact of the inclusion of such item in the Schedules or Exhibits in any dispute

16

or controversy between the parties as to whether any obligation, item or matter is or is not material for purposes hereof.

8.6Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart.

8.7Entire Agreement; Third Party Beneficiaries.  This Agreement (including the Schedules and Exhibits) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, other than.  This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, except for the provisions of Article 2 and Article 5 hereof, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

8.8Governing Law.  This Agreement shall be governed and construed in accordance with the laws of the State of New York, without regard to the laws that might be applicable under conflicts of laws principles.

8.9Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Merger is not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the Merger are consummated as originally contemplated to the greatest extent possible.  Any provision of this Agreement held invalid or unenforceable only in part, degree or certain jurisdictions will remain in full force and effect to the extent not held invalid or unenforceable.  To the extent permitted by applicable law, each party waives any provision of law that renders any provision of this Agreement invalid, illegal or unenforceable in any respect.

8.10Assignment.  Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether by operation of law or otherwise), without the prior written consent of the other parties, and any attempt to make any such assignment without such consent shall be null and void.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.

8.11Enforcement.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms.  It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity.

17

8.12Definitions.  As used in this Agreement:

(a)“Board of Directors” means the Board of Directors of any specified Person and any properly serving and acting committees thereof.

(b)“Organizational Documents” means, with respect to any entity, the certificate of incorporation, bylaws or other governing documents of such entity.

(c)“Person” means an individual, corporation, partnership, limited liability company association, trust, unincorporated organization, entity or group (as defined in the Exchange Act).

(d)“Subsidiary” when used with respect to any party means any corporation or other organization, whether incorporated or unincorporated, (i) of which such party or any other Subsidiary of such party is a general partner (excluding partnerships, the general partnership interests of which held by such party or any Subsidiary of such party do not have a majority of the voting and economic interests in such partnership) or (ii) at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries.

(e)“the other party” means, with respect to the Company, Parent and means, with respect to Parent, the Company.

18

IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of October 26, 2004.

COGENT COMMUNICATIONS GROUP, INC.
By:	/s/ David Schaeffer
Name: David Schaeffer
Title: Chairman and Chief Executive Officer
COGENT POTOMAC, INC.
By:	/s/ David Schaeffer
Name: David Schaeffer
Title: President
NVA ACQUISITION, INC.
By:	/s/ Robert N. Beury, Jr.
Name: Robert N. Beury, Jr.
Title: President

EX-2.9

Exhibit 2.9

AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS

by and between

the Seller party hereto,

VERIO INC.,

the Buyer party hereto,

SFX ACQUISITION, INC.,

and Parent of the Buyer party hereto,

COGENT COMMUNICATIONS, INC.,

dated as of December 1, 2004

TABLE OF CONTENTS

					Page
1.	DEFINITIONS				1
	1.1	Defined Terms			1
	1.2	Other Definitional and Interpretive Matters			6
2.	PURCHASE AND SALE OF THE ASSETS				7
	2.1	Purchased Assets			7
	2.2	Assignment of Contracts			7
	2.3	Excluded Assets			8
	2.4	Assumed Liabilities; Excluded Liabilities			8
	2.5	Purchase Price			8
	2.6	Net Working Capital Adjustments			9
	2.7	No Offset			10
	2.8	Further Assurances; Further Conveyances and Assumptions; Subsequently Assigned Contracts			10
3.	REPRESENTATIONS AND WARRANTIES OF SELLER				12
	3.1		Organization and Qualification		12
	3.2		Authorization; Binding Effect		12
	3.3		Non-Contravention; Seller’s Consents		13
	3.4		Title to Purchased Assets		14
	3.5		Licenses and Permits		14
	3.6		Compliance With Laws; Litigation		14
	3.7		Identified Employees		15
	3.8		Contracts		15
	3.9		Real Property		15
	3.10		Taxes		16
	3.11		Brokers		16
	3.12		Environmental Matters		16
	3.13		Schedule 2.6		16
	3.14		No Knowledge of Misrepresentations or Omissions; No Additional Representations or Warranties		16
	3.15		No Other Representations		17
4.	REPRESENTATIONS AND WARRANTIES OF BUYER				17
	4.1			Organization and Qualification	17
	4.2			Authorization; Binding Effect	17
	4.3			Non-Contravention; Buyer’s Consents	18
	4.4			Compliance with Laws; Litigation	19
	4.5			No Knowledge of Misrepresentations or Omissions; No Additional Representations or Warranties	19

i

	4.6	Brokers		19
	4.7	No Other Representations		19
5.	CERTAIN COVENANTS			20
	5.1	Access to Information		20
	5.2	Taxes		20
	5.3	Employees; Employee Benefits		21
	5.4	Regulatory Compliance		22
	5.5	Inadvertent Payments and Transfers		22
	5.6	Additional Covenants		22
	5.7	Confidentiality		23
6.	CLOSING			24
	6.1		Closing	24
	6.2		Deliveries by Seller	24
	6.3		Deliveries by Buyer	24
	6.4		Additional Agreements	24
	6.5		Contemporaneous Effectiveness	25
7.	PARENT GUARANTEE; JOINT AND SEVERAL OBLIGATIONS			25
8.	SURVIVAL AND INDEMNITY			25
	8.1	Survival of Representations and Warranties		25
	8.2	General Agreement to Indemnify		25
	8.3	General Procedures for Indemnification		27
9.	MISCELLANEOUS PROVISIONS			29
	9.1	Notices		29
	9.2	Expenses		30
	9.3	Entire Agreement		30
	9.4	Waiver of Jury Trial		30
	9.5	Governing Law		30
	9.6	Waiver		31
	9.7	No Oral Modification		31
	9.8	Assignments; Successors		31
	9.9	Severability		31
	9.10	Specific Performance		31
	9.11	Limitations on Public Disclosure		32
	9.12	No Third Party Beneficiaries		32
	9.13	Time of the Essence		32
	9.14	Counterparts		32
	9.15	Waiver of Compliance with Bulk Transfer Laws		32

ii

Exhibits
Exhibit A	Form of Bill of Sale
Exhibit B	Form of Assumption Agreement
Exhibit C	Form of Seller Access Agreement
Exhibit D	Form of Transition Services Agreement
Exhibit E	Form of Buyer Customer Service Agreement
Schedules
Schedule 2.1		Purchased Assets
Schedule 2.2		Purchased Contracts
Schedule 2.6		Net Working Capital
Other Schedules		Buyer Disclosure Schedule – Not applicable (no disclosures required)
		Seller Disclosure Schedule – Not applicable (no disclosures required)
Attachment I		Employee Matters

iii

AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS

THIS AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS is made as of December 1, 2004 by and between Verio Inc., a Delaware corporation (“Seller”), SFX Acquisition, Inc., a Delaware corporation (“Buyer”), and Cogent Communications, Inc., a Delaware corporation (“Parent”).

RECITALS

A.  WHEREAS, Seller is, among other things, engaged in the business of providing internet access, hosting, security and related services;

B.  WHEREAS, Seller desires to sell, transfer and assign to Buyer, and Buyer desires to purchase and assume from Seller, the Purchased Assets and the Purchased Contracts, and Buyer is willing to assume the Assumed Liabilities, in each case as more fully described and upon the terms and subject to the conditions set forth herein;

C.  WHEREAS, concurrently with the execution of this Agreement, Seller and Buyer are entering into the Bill of Sale and other documents and instruments to effectuate the transfer of the Purchased Assets and the Purchased Contracts, the assumption of the Assumed Liabilities and the consummation of the other transactions contemplated hereby, including the Transition Services Agreement and an Assumption Agreement, and after the date hereof may enter into or deliver other agreements, documents and instruments as contemplated hereby to effectuate such transfer, assumption and consummation, including additional Assumption Agreements (all such concurrent or subsequent agreements, documents and instruments, as amended, supplemented or otherwise modified in accordance with the provisions hereof or thereof, and in each case including the attachments and schedules thereto, collectively, the “Collateral Agreements”); and

D.  WHEREAS, Parent desires Seller to enter into this Agreement and the other Collateral Agreements, and, in order to induce Seller to enter into this Agreement and the other Collateral Agreements, agrees to be jointly and severally liable with Buyer for all of Buyer’s agreements and obligations arising under this Agreement and the Collateral Agreements.

NOW, THEREFORE, in consideration of the mutual agreements, covenants, representations and warranties contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to the terms and conditions hereinafter set forth, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

AGREEMENT

1.DEFINITIONS

1.1Defined Terms

For the purposes of this Agreement, the following words and phrases shall have the following meanings whenever used in this Agreement (including the schedules, attachments and exhibits hereto):

1

“Accounts Payable” has the meaning assigned in Section 2.4.

“Accounts Receivable” has the meaning assigned in Section 2.6.

“Action” means any action, litigation, claim, suit, arbitration, mediation, inquiry, investigation, government investigation, regulatory proceeding or other proceeding of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any arbitrator or Governmental Body or similar Person or body.

“Affiliate” of any Person means any Person that controls, is controlled by, or is under common control with such Person.  As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

“Agreement” means this Agreement for the Purchase and Sale of Assets, as amended, supplemented or otherwise modified in accordance with its terms, and including attachments and schedules hereto.

“Allocation Agreement” has the meaning assigned in Section 5.2(b).

“Applicable Geographic Area” has the meaning assigned in Section 5.6(a).

“Assumed Liabilities” has the meaning assigned in Section 2.4(a).

“Assumption Agreement” has the meaning assigned in Section 6.4 and includes the Assumption Agreement delivered at Closing and any other Assumption Agreement delivered pursuant to the terms hereof.

“Benefit Plan” means each “employee benefit plan,” as defined in Section 3(3) of ERISA (including any “multiemployer plan” as defined in Section 3(37) of ERISA) and each profit-sharing, bonus, stock option, stock purchase, stock ownership, pension, retirement, severance, deferred compensation, excess benefit, supplemental unemployment, post-retirement medical or life insurance, welfare or incentive plan, or sick leave, long-term disability, medical, hospitalization, life insurance, other insurance plan, or other employee benefit plan, program or arrangement, whether written or unwritten, qualified or non-qualified, funded or unfunded, sponsored, maintained or contributed to by Seller in which any Identified Employee participates or with respect to which Seller has any liability, with respect to any Identified Employee.

“Bill of Sale” has the meaning assigned in Section 6.2(a).

“Business Day” means a day that is not a Saturday, a Sunday or a day on which banks in The City of New York or the State of Colorado are authorized or required by law, regulation or executive order to remain closed.

“Buyer” has the meaning assigned in the preamble hereof.

“Buyer’s Consents” has the meaning assigned in Section 4.3(b).

2

“Buyer Customer Service Agreement” has the meaning assigned in Section 6.4(d).

“Cap” has the meaning assigned in Section 8.2(d).

“Closing” has the meaning assigned in Section 6.1.

“Closing Date” has the meaning assigned in Section 6.1.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collateral Agreements” has the meaning assigned in Recital C.

“Communications Act” shall mean the Communications Act of 1934, as amended by the Telecommunications Act of 1996, and from time to time thereafter as well as the rules and regulations promulgated thereunder.

“Confidential Information” has the meaning assigned in Section 5.7(c).

“Contracts” means all contracts, agreements, leases, subleases, licenses, sublicenses, commitments, indemnities, assignments, understandings and arrangements, whether written or oral.

“Customer Contracts” means Purchased Contracts that are contracts with customers or resellers of Seller.

“Deferred Revenue” has the meaning assigned in Section 2.6.

“Encumbrance” means any mortgage, pledge, security interest, easement, hypothecation, assignment, lien or other encumbrance.

“Environmental Law” shall mean any Law which relates to or otherwise imposes liability or standards of conduct concerning discharges, emissions, releases or threatened releases of noises, pathogens, odors, pollutants, or contaminants or hazardous or toxic wastes, substances or materials, whether as matter or energy, into air (whether indoors or out), water (whether surface or underground) or land (including any subsurface strata), or otherwise relating to their manufacture, processing, generation, distribution, use, treatment, storage, disposal, cleanup, transport or handling, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control Act of 1976, as amended, the Federal Water Pollution Control Act Amendments of 1972, the Clean Water Act of 1977, as amended, the National Environmental Policy Act of 1969, and any state provision analogous to any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Excluded Assets” has the meaning assigned in Section 2.3.

“Excluded Liabilities” has the meaning assigned in Section 2.4(b).

3

“FCC” means the Federal Communications Commission.

“Governmental Body” means any nation or government, any state or other political subdivision thereof, any legislative, executive or judicial unit or instrumentality of any governmental entity (foreign, federal, state or local) or any department, commission, board, agency, bureau, official or other regulatory, administrative or judicial authority thereof or any entity (including a court or self-regulatory organization) exercising executive, legislative, judicial, Tax, regulatory or administrative functions of or pertaining to government.

“Hazardous Substance” means any material, substance, form of energy or pathogen which (i) constitutes a “hazardous substance”, “toxic substance” or “pollutant”, “contaminant”, “hazardous material”, “hazardous chemical”, “regulated substance”, or “hazardous waste” (as such terms are defined by or pursuant to any Environmental Law) or (ii) is otherwise regulated or controlled by, or gives rise to liability under, any Environmental Law.

“Hired Employee” has the meaning assigned in Section 5.3.

“Inbound Deposits” has the meaning assigned in Section 2.6.

“Indemnified Party” has the meaning assigned in Section 8.2(a).

“Indemnifying Party” has the meaning assigned in Section 8.2(a).

“Identified Employees” has the meaning assigned in Section 5.3.

“Knowledge” means, in connection with any reference to the Knowledge of Seller or Buyer, the actual knowledge of any directors or executive officers who are responsible for the management, administration or execution of the subject matter of such representation and warranty (after due inquiry of the persons who report directly to such directors or officers) of, in the case of Knowledge of Seller, Seller, or, in the case of Knowledge of Buyer, Buyer.

“Law” or “Laws” shall mean any law, statute, ordinance, rule, regulation, code, order, judgment, Tax ruling, injunction, decision or decree of any Governmental Body.

“Licenses” shall mean any licenses, registrations or certificates granted to Seller by the FCC under the Communications Act and or any state public utility commission, regulatory agency or similar regulatory body as required by applicable Law.

“Losses” has the meaning assigned in Section 8.2(a).

“Material Adverse Effect” means a material adverse effect on (i) the operations, condition (financial or other) or results of operations of the Purchased Assets and the Purchased Contracts (taken together as a whole), or (ii) the ability of Seller to consummate the transactions contemplated by this Agreement and the Collateral Agreements or to perform its obligations hereunder or thereunder, respectively; provided, that none of the following shall be deemed, either alone or in combination, to constitute a Material Adverse Effect:  (i) conditions generally affecting any of the industries or markets in which Seller or Buyer, as the context requires, operate; (ii) the engagement in hostilities by the United States, an escalation in hostilities

4

involving the United States or a declaration of a national emergency or war by the United States; (iii) any change in general economic, political or financial condition of the United States, including as a result of terrorist activities; or (iv) any disruption arising out of the announcement of the transaction contemplated hereby.

“Net Working Capital” has the meaning assigned in Section 2.6.

“New Hire Date” has the meaning assigned in Section 5.3.

“Outbound Deposits” has the meaning assigned in Section 2.6.

“Parent” has the meaning assigned in the preamble hereof.

“Permits” means all material permits, licenses, certificates, approvals, qualifications, registrations, and similar authorizations issued to Seller by a Governmental Body related to the Purchased Assets or Purchase Contracts, including any amendment, modification, limitation, condition or renewal thereof, other than a License.

“Permitted Encumbrances” means (i) liens on personal property for Taxes not yet due and payable, (ii) any mechanics’, carriers’, workmen’s, repairmen’s or other similar liens arising or incurred in the ordinary course of business and (iii) those Encumbrances set forth in the Seller Disclosure Schedule and designated as Permitted Encumbrances.

“Person” means any individual, corporation, partnership, limited liability company, limited liability firm, association, joint venture, joint stock company, trust, unincorporated organization or other entity, or any Governmental Body.

“Prepaid Amounts” has the meaning assigned in Section 2.6.

“Purchase Price” has the meaning assigned in Section 2.5(a).

“Purchased Assets” has the meaning assigned in Section 2.1 and for the avoidance of doubt does not include the Purchased Contracts.

“Purchased Contracts” has the meaning assigned in Section 2.2.

“Real Property Leases” shall mean the leases with respect to real property listed on Schedule 2.2.

“Seller” has the meaning assigned in the preamble hereof.

“Seller Access Agreement” has the meaning assigned in Section 6.4(b).

“Seller Disclosure Schedule” has the meaning assigned in the preamble to Section 3.

“Seller’s Consents” has the meaning assigned in Section 3.3(b).

“Services” has the meaning assigned in Section 5.6(a).

5

“Subsequently Assigned Contracts” has the meaning assigned in Section 2.8(b).

“Tax Returns” means all returns, information returns, reports, declarations, or other filings required to be made with any Governmental Body with respect to Taxes.

“Tax Warranties” shall mean the representations and warranties in Section 3.10.

“Taxes” mean all taxes of any kind, charges, fees, customs, levies, duties, imposts, required deposits or other assessments, including all net income, capital gains, gross income, gross receipt, property, franchise, sales, use, excise, withholding, payroll, employment, social security, worker’s compensation, unemployment, occupation, capital stock, ad valorem, value added, transfer, gains, profits, license, net worth, asset, transaction, and other taxes, imposed upon any Person by any Law or Governmental Body, together with any interest and any penalties, or additions to tax, with respect to such taxes.

“Third Party” means any Person other than, and not an Affiliate of, the other referenced Person or Persons.

“Third Party Claim” has the meaning assigned in Section 8.3(a).

“Threshold” has the meaning assigned in Section 8.2(d).

“Title and Authorization Warranties” shall mean the representations and warranties in Sections 3.1, 3.2, 3.4(a), 4.1 and 4.2.

“Transition Services Agreement” has the meaning assigned it in Section 6.4(c).

1.2Other Definitional and Interpretive Matters

Unless otherwise expressly provided, for purposes of this Agreement and the Collateral Agreements, the following rules of interpretation shall apply:

(a)Calculation of Time Period.  When calculating the period of time before which, within which or following which any act is to be done or step taken, the date that is the reference date in calculating such period shall be excluded.  If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

(b)Gender and Number.  Any reference to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.

(c)Headings.  The provision of a Table of Contents, the division into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement and the Collateral Agreements.  All references in this Agreement to any “Section” are to the corresponding Section of the agreement in which such reference occurs unless otherwise specified.  Unless otherwise specified, all references herein to numbered articles and sections are to articles and sections of this Agreement, all references herein to schedules are to

6

schedules to this Agreement and all references herein to exhibits are to exhibits to this Agreement.

(d)Herein.  The words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to the agreement in which such reference occurs as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.

(e)Including.  The word “including” or any variation thereof means “including without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.

2.PURCHASE AND SALE OF THE ASSETS

2.1Purchased Assets

(a)Upon the terms and subject to the conditions of this Agreement, (i) Seller hereby sells and transfers, assigns, conveys and delivers to Buyer, and Buyer hereby purchases, acquires and accepts from Seller, all of Seller’s right, title and interest in, to and under, the assets and properties described on Schedule 2.1 (collectively, the “Purchased Assets”), and (ii) legal and equitable title and risk of loss with respect to all of the Purchased Assets hereby passes to Buyer.  Delivery of the Purchased Assets hereunder shall be on a “where-is” basis, and Buyer assumes all liability for any right-to-use licensing or certification for such equipment.

(b)No physical transfer or delivery of Purchased Assets shall be required.

2.2Assignment of Contracts

(a)Upon the terms and subject to the conditions of this Agreement, including the provisions concerning the transfer of Subsequently Assigned Contracts, Seller hereby assigns and transfers to Buyer all of Seller’s right, title and interest in and to, and Buyer hereby assumes and takes assignment of, the Contracts listed on Schedule 2.2 (including rights to any Accounts Receivable set forth on Schedule 2.6), including the Real Property Leases (collectively, the “Purchased Contracts”).

(b)The parties acknowledge and agree that Schedule 2.2 as attached on the date hereof reflects Contracts as of October 31, 2004.  Seller shall deliver to Buyer within 7 Business Days following the Closing Date a revised Schedule 2.2 reflecting Contracts as of the Closing Date, including any deletions of Contracts that that have expired or otherwise been terminated and the addition of any Contracts similar to the Contracts listed on Schedule 2.2 as attached on the date hereof.  Such revised Schedule 2.2, when incorporated herein pursuant to an amendment to this Agreement executed by each party hereto (such execution not to be unreasonably withheld or delayed by any party hereto), shall be definitive for all purposes of this Agreement and the Collateral Agreements.

7

2.3Excluded Assets

Notwithstanding anything herein to the contrary (but subject to Sections 2.2(b) and 2.6 hereof), Seller shall be deemed to sell, transfer, assign, convey and deliver, and Buyer shall be deemed to purchase, assume and acquire, only (i) the Purchased Assets described on Schedule 2.1, (ii) the Purchased Contracts listed on Schedule 2.2, and (iii) the Inbound Deposits identified on Schedule 2.2, and Buyer shall not be deemed to acquire any other asset or right whatsoever, including any interest in any accounts receivable (except as provided in Section 2.2), Contracts (other than the Purchased Contracts), cash, bank accounts, certificates of deposit, commercial paper, treasury bills and notes, money market investments and other marketable securities and similar cash equivalents and instruments (the “Excluded Assets”).

2.4Assumed Liabilities; Excluded Liabilities

(a)Upon the terms and subject to the conditions of this Agreement, including the provisions with respect to Subsequently Assigned Contracts, Seller hereby assigns, and Buyer hereby assumes and agrees to honor, pay and discharge when due:

(i)all of Seller’s accounts payable with respect to the Purchased Assets and Purchased Contracts set forth on Schedule 2.6 (“Accounts Payable”), and

(ii)all liabilities and obligations arising under or with respect to any Purchased Asset or Purchased Contract in connection with or as a result of facts, events or circumstances occurring, or accruing, after the Closing Date (such Accounts Payable and other liabilities and obligations, collectively, the “Assumed Liabilities”).

Seller acknowledges and agrees that, except for the Accounts Payable, all liabilities and obligations arising under or with respect to any Purchased Asset or Purchased Contract in connection with or as a result of facts, events or circumstances occurring, or accruing, before the Closing Date shall remain liabilities and obligations of Seller.

(b)Except as set forth in this Agreement or any Collateral Agreement, Buyer shall not assume or otherwise be liable in respect of, or be deemed to have assumed or otherwise be liable in respect of, any other liability or obligation of Seller or its Affiliates, including any debt (including any debt or other obligation to any Third Party or to any Affiliate of Seller), claim, obligation or other liability (including any litigation or potential litigation to which Seller is or may be a party, and any other liability, preference or fraudulent conveyance claim in bankruptcy, liability for Taxes (whether or not accrued, assessed or currently due and payable), undisclosed liability, contingent liability or unknown liability) of Seller or any of its Affiliates whatsoever (collectively, the “Excluded Liabilities”).

2.5Purchase Price

(a)In consideration of the sale, transfer, assignment, conveyance, delivery and transfer by Seller of the Purchased Assets and the Purchased Contracts, concurrently with the execution of this Agreement (but subject to Article 6 hereof) Buyer shall:

(i)pay $1.00, in cash, to Seller (the “Purchase Price”), and

8

(ii)assume the Assumed Liabilities.

(b)In the event of any conflict between the terms of this Agreement and the terms of the Transition Services Agreement or any other Collateral Agreement, the terms of this Agreement shall control.

2.6Net Working Capital Adjustments

(a)Schedule 2.6 attached hereto states the Net Working Capital as of October 31, 2004, and reflects the Accounts Receivable, Inbound Deposits, Prepaid Amounts, Accounts Payable, Outbound Deposits, Deferred Revenue and Net Working Capital as of October 31, 2004.  Within 7 Business days following the Closing Date, Seller will deliver to Buyer a revised Schedule 2.6 stating the Net Working Capital as of the Closing Date, with each category set forth above updated and determined in a manner consistent with the manner in which Schedule 2.6 as attached on the date hereof was determined.  Such revised Schedule 2.6, when incorporated herein pursuant to an amendment to this Agreement executed by each party hereto (such execution not to be unreasonably withheld or delayed by any party hereto), shall be definitive for all purposes of this Agreement and the Collateral Agreements.

(b)“Net Working Capital” shall mean the net amount of:

(i)the sum of (x) Inbound Deposits, plus (y) Accounts Receivable, plus (z) Prepaid Amounts, minus

(ii)the sum of (x) Accounts Payable, (y) Outbound Deposits, and (z) Deferred Revenue.

(c)With respect to the Net Working Capital as of the Closing Date, if the sum of the amounts referenced in (b)(i) above exceeds the sum of the amounts referenced in (b)(ii) above, Seller may withhold one or more payments or remittances (including remittances of Accounts Receivable thereunder) otherwise to be made to Buyer pursuant to the Buyer Customer Service Agreement or the Transition Services Agreement in an aggregate amount equal to the amount of the difference between such sums.  Conversely, if the sum of the amounts referenced in (b)(ii) above exceeds the sum of the amounts referenced in (b)(i) above, Buyer may withhold one or more payments otherwise to be made to Seller pursuant to the Seller Access Agreement or the Transition Services Agreement in an aggregate amount equal to the difference between such sums.  The Parties agree that the foregoing offset rights of Seller and Buyer shall supercede any prohibition against set-off or deduction in the Buyer Customer Service Agreement, Seller Access Agreement or Transition Services Agreement.

(d)For purposes of this Agreement, the following terms shall have the following meanings:

(i)“Accounts Receivable” means accounts receivable of Seller pursuant to the Customer Contracts.

(ii)“Deferred Revenue” means any revenue that has been prepaid to Seller as of the Closing Date under the Customer Contracts with respect to goods and services to

9

be provided on or after the Closing Date, regardless of whether the recipient of such goods or services has received an invoice for such goods or services and as adjusted for non-payment by customers and adjustments issued thereto; provided, that the parties acknowledge that Schedule 2.6 as attached on the date hereof reflects such amounts determined as of October 31, 2004.

(iii)“Inbound Deposits” means security deposits previously paid by Seller and subject to return to Buyer under the Purchased Contracts.

(iv)“Outbound Deposits” means security deposits previously received by Seller and subject to return to customers by Buyer under the Customer Contracts.

(v)“Prepaid Amounts” shall mean any amounts (including rent) prepaid by Seller with respect to goods and services obtained, or that would have been obtained, by Seller under the Purchased Contracts after the Closing Date (regardless of whether such Purchased Contract is assigned as of the Closing Date or at a later date); provided, that the parties acknowledge that Schedule 2.6 as attached on the date hereof reflects such amounts determined as of October 31, 2004.

2.7No Offset

Except as specifically provided in this Agreement or any Collateral Agreement, Buyer’s and Seller’s obligations under this Agreement or any Collateral Agreement shall not be subject to offset or reduction for any reason, including by reason of any actual or alleged breach of any representation, warranty or covenant contained in this Agreement or any of the Collateral Agreements or any right or alleged right to indemnification hereunder.

2.8Further Assurances; Further Conveyances and Assumptions; Subsequently Assigned Contracts

(a)Subject to the terms and conditions hereof, Seller and Buyer shall use commercially reasonable efforts to take all actions and to do all things necessary, proper or advisable to consummate the transactions contemplated hereby.  Seller shall, from time to time subsequent to the Closing Date, at Buyer’s request, execute and deliver such other instruments of conveyance, assignment and transfer and take such other actions as Buyer may reasonably request in order more effectively to convey, assign, transfer to and vest in Buyer the Purchased Assets and the Purchased Contracts, subject to any restrictions under applicable Law.  Buyer shall, from time to time subsequent to the Closing Date, at Seller’s request, execute and deliver such other instruments of conveyance, assignment and transfer and take such other actions as Seller may reasonably request in order more effectively to accomplish the assumption of, and discharge Seller from responsibility for, the Assumed Liabilities.

(b)Notwithstanding the provisions of Section 2.2 or any other provision hereof, this Agreement and the Collateral Agreements shall not constitute an agreement to transferor assign or, vis-à-vis the Third Party to the Purchased Contract, assume, as of the Closing Date, any Purchased Contract identified on Schedule 2.2 as requiring the prior consent of any Third Party (the “Subsequently Assigned Contracts”) or any claim, right or benefit or, vis-à-vis the Third Party to the Purchased Contract, any obligation under or resulting from any

10

such Subsequently Assigned Contract until such time as the requisite consents to such actions in respect of any such Subsequently Assigned Contract are obtained (or in some cases new contracts with Buyer or assignable to Buyer without consent are entered into), which is expected to occur after the Closing Date.  Buyer and Seller acknowledge that the Subsequently Assigned Contracts require the consents of one or more Third Parties for transfer, assignment or assumption as contemplated by this Agreement and the Collateral Agreements.  The following terms, in addition to the terms set forth above and in the Transition Services Agreement, shall govern the Subsequently Assigned Contracts:

(i)Without limiting the generality of the provisions relating to the Subsequently Assigned Contracts, the absence of consents with respect to the Subsequently Assigned Contracts shall not delay the Closing on the date hereof in respect of all other Purchased Contracts and other assets.

(ii)Seller and Buyer shall use their commercially reasonable efforts to obtain any such consents with respect to the Subsequently Assigned Contracts, or in some cases to effect new contractual arrangements with no less favorable contractual terms, including as to pricing, that can either be assigned to Buyer or entered into directly with Buyer that have the effect of transferring the rights, benefits and obligations of such Subsequently Assigned Contract.  Neither Seller nor Buyer shall agree to terms for assignment of Subsequently Assigned Contracts or other arrangements with respect to Subsequently Assigned Contracts with such Third Parties without the other party’s prior written consent, which consent shall not be unreasonably withheld.

(iii)From and after the Closing Date, Buyer shall, to the maximum extent reasonably practical, obtain all the rights and benefits of (including anyll associated Accounts Receivable), and Buyer shall pay and perform, or reimburse and indemnify Seller for, all the costs, liabilities and burdens with respect to such Subsequently Assigned Contracts as a result of facts, events or circumstances occurring, or accruing, after the Closing Date pending any assignment, transfer or implementation of new arrangements with respect to, such Subsequently Assigned Contracts.  To the extent Buyer and Seller have failed to obtain all required consents necessary to complete transfer and assignment of the Subsequently Assigned Contracts, the Parties will cooperate by extending the Transition Services Agreement or entering into another agreement on commercially reasonable terms for a reasonable period sufficient to enable Buyer to maintain service to customers without disruption and obtain for Buyer, to the extent commercially feasible for the Parties, the benefits of the Subsequently Assigned Contracts.

(iv)Each party will notify the other promptly upon the receipt of any required consent or the implementation of any other arrangement with respect to any Subsequently Assigned Contract.  Upon such receipt or implementation (provided no other consents are required), the related Contract automatically shall be transferred and assigned to, and assumed by, Buyer, or such other arrangement shall come into full force and effect, without any further action on the part of Seller or Buyer, provided, that Seller and Buyer nonetheless shall execute and deliver to each other an Assumption Agreement or an appropriate acknowledgement of such other arrangement, which such instruments shall constitute Collateral Agreements for all purposes of this Agreement.

11

(c)Seller shall pay all fees required for the outward transfer or disconnection of telecommunications circuits related to the assignment of the Purchased Contracts under Seller’s existing Contracts with or the tariff arrangements currently binding on Seller of the providers of such circuits.  Buyer shall pay all fees required for the inward transfer, set up, connection, commencement or initiation of telecommunications circuits related to the assignment of the Purchased Contracts under Buyer’s existing Contracts with or the tariff arrangements currently binding on Buyer of the providers of telecommunications circuits.  Notwithstanding anything in this Agreement or any Collateral Agreement to the contrary, Seller shall not be required to pay any other fees, charges or Third Party expenses or make any other concessions to any Person in order to obtain any consents or enter into any arrangements as described above or otherwise in connection with this Agreement and the Collateral Agreements and the transactions contemplated hereby or thereby.  Without limiting the generality of the foregoing, except as provided above, Seller shall not be required to pay any one time set up, commencement or initiation fees for the provisioning of or transfer of any telecommunications circuits, routers, or other hardware being transferred to Buyer, provisioned for Buyer, replaced by Buyer or otherwise moved to or initiated by Buyer, nor the costs of transfer of any maintenance contracts or similar obligations related thereto, in connection with the transactions contemplated by this Agreement.

(d)At the Closing, Buyer and Seller shall enter into the Seller Access Agreement relating to Buyer’s use, without assignment and assumption, of certain telecommunications circuits identified therein, and Buyer shall reimburse Seller or pay or perform all the liabilities and obligations arising under or in connection with such telecommunications circuits in accordance with the provisions of the Seller Access Agreement.

(e)At the Closing, Buyer and Seller shall enter into the Buyer Customer Service Agreement relating to Seller’s use of certain telecommunications circuits identified therein, and Seller shall pay to Buyer all charges for use of such circuits for the full term specified for each in the Buyer Customer Service Agreement.

3.REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the schedule delivered by Seller to Buyer concurrently with the execution of this Agreement (the “Seller Disclosure Schedule”), Seller hereby represents and warrants to Buyer as of the Closing Date as follows:

3.1Organization and Qualification

Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  Seller has all requisite corporate power and authority to own, lease or license and operate the Purchased Assets as currently operated.  Seller is qualified to do business in California, Colorado, Florida, Georgia, Illinois, Michigan, Missouri, New York, Oregon, Virginia and Washington.

3.2Authorization; Binding Effect

(a)Seller has all requisite corporate power and authority to execute and deliver this Agreement and each Collateral Agreement to which it is or will be a party and to

12

effect the transactions contemplated hereby and thereby.  The execution, delivery and performance by Seller of this Agreement and each Collateral Agreement to which it is or will be a party and the consummation by Seller of the transactions contemplated hereby and thereby have been duly and validly approved by Seller’s board of directors, and no other corporate actions or proceedings on the part of Seller or any Affiliate of Seller are necessary to authorize the execution, delivery and performance by Seller of this Agreement or the Collateral Agreements to which it is or will be a party or the transactions contemplated hereby and thereby.

(b)Seller has duly and validly executed and delivered this Agreement and the Collateral Agreements to be delivered at the Closing to which it is a party.  Assuming due execution by Buyer, this Agreement and each such Collateral Agreement constitutes valid and legally binding obligations of Seller, enforceable against Seller in accordance with their respective terms, except as such agreements may be subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws and equitable principles relating to or affecting or qualifying the rights of creditors generally and general principles of equity.

3.3Non-Contravention; Seller’s Consents

(a)The execution, delivery and performance of this Agreement and the applicable Collateral Agreements by Seller, and the consummation of the transactions contemplated hereby and thereby, but subject, in any case, to the provisions of Section 2.8(b), do not and will not:

(i)conflict with or result in a breach or violation of any provision of any organizational documents of Seller;

(ii)violate or result in a breach of or constitute an occurrence of default under any provision of, result in the acceleration or cancellation of any obligation under, or give rise to a right by any party to terminate or amend its obligations under, any Purchased Contract, or result in the creation of any Encumbrance upon any of the Purchased Assets or Purchased Contracts (other than a Permitted Encumbrance); or

(iii)violate any Law of any Governmental Body having jurisdiction over Seller or the Purchased Assets or Purchased Contracts,

except with respect to any right-to-use licensing or certification related to the Purchased Assets and except with respect to clauses (ii) and (iii) above as would not reasonably be expected individually or in the aggregate to have a Material Adverse Effect.

(b)Subject to the provisions hereof relating to Subsequently Assigned Contracts, no consent, authorization, order or approval of, filing or registration with, or waiver of any right of first refusal or first offer from, any Governmental Body or any other Person not a party to this Agreement is necessary in connection with the execution, delivery and performance by Seller of this Agreement or the Collateral Agreements or the consummation by Seller of the transactions contemplated hereby or thereby, except with respect to any right-to-use licensing or certification related to the Purchased Assets and except as would not

13

reasonably be expected individually or in the aggregate to have a Material Adverse Effect (any such consents, approvals, orders, authorizations, registrations, declarations and filings listed on the Seller Disclosure Schedule being referred to herein collectively as the “Seller’s Consents”).

3.4Title to Purchased Assets

(a)Subject to the provisions hereof relating to Subsequently Assigned Contracts, (i) Seller has good and valid title to, or a valid and binding leasehold interest or license in, the Purchased Assets and the Purchased Contracts, free and clear of any Encumbrance except for Permitted Encumbrances, and (ii) assuming receipt of the Seller’s Consents has the full right to sell, convey, transfer, assign and deliver the Purchased Assets and Purchased Contracts to Buyer at the Closing, free and clear of all Encumbrance except for Permitted Encumbrances, except with respect to any right-to-use licensing or certification related to the Purchased Assets.

(b)All of the tangible Purchased Assets are in operating condition and repair reasonably sufficient for their current use as conducted by Seller (with the exception of normal wear and tear).

(c)The Purchased Assets and the Purchased Contracts are sufficient to allow Seller in conjunction with its general infrastructure and personnel to perform its current obligations under the Purchased Contracts as currently being performed by Seller.

3.5Licenses and Permits

Seller is in compliance with the Licenses and Permits, if any, which are required for it to own, lease or operate the Purchased Assets as currently owned, leased and operated by Seller in its current business, except where the failure to be so would not individually or in the aggregate have a Material Adverse Effect, and no Action is pending or, to Seller’s Knowledge, threatened to revoke or limit any such License or Permit, except in either case as would not individually or in the aggregate have a Material Adverse Effect.

3.6Compliance With Laws; Litigation

(a)Except as would not reasonably be expected individually or in the aggregate to have a Material Adverse Effect, Seller is in compliance with all Laws of or from Governmental Bodies applicable to the Purchased Assets and the Purchased Contracts.

(b)There are no Actions pending (to Seller’s Knowledge with respect to government investigations) or, to Seller’s Knowledge, threatened against Seller or, to Seller’s Knowledge, any of its officers, directors, employees, agents or stockholders in their capacity as such, in each case with respect to the Purchased Assets or the Purchased Contracts.  Seller is not subject to any order (consent or other), judgment, decree, injunction or stipulation of or with any court or other Governmental Body that names Seller and imposes a material ongoing obligation with respect to the operation of the Purchased Assets or the Purchased Contracts.

(c)There are no Actions pending (to Seller’s Knowledge with respect to government investigations) or, to Seller’s Knowledge, threatened by or against Seller with

14

respect to this Agreement or any of the Collateral Agreements, or in connection with the transactions contemplated hereby or thereby, that would reasonably be expected to prevent or materially delay the consummation by Seller of the transactions contemplated hereby or thereby or would reasonably be expected individually or in the aggregate to have a Material Adverse Effect.

(d)Seller is in compliance with all Benefit Plans and ERISA obligations arising from or relating to the employment of the Identified Employees with Seller, and the consummation of the transactions contemplated by this Agreement and the Collateral Agreements will not result in a violation or breach of any Benefit Plan, ERISA obligation or other relevant employment Law, except in each case as would not, individually or in the aggregate, resulting any material liability to Buyer.

3.7Identified Employees

Seller is in compliance with all Laws regarding employment of the Identified Employees, except for any failures to comply that would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect.  Seller is not a party to any collective bargaining or other labor union contract applicable to Identified Employees in the United States and no such collective bargaining agreement is being negotiated by Seller.

3.8Contracts

(a)Seller has made available to Buyer (through Seller’s virtual data room or otherwise) (i) to the extent they are in writing, true, accurate and complete copies of each of the Purchased Contracts and (ii) to the extent they are not in writing, a written description of each of the Purchased Contracts.

(b)Each Purchased Contract was entered into by Seller in the ordinary course of business.

(c)To Seller’s Knowledge, each of the Purchased Contracts is valid and binding on Seller and on the other parties thereto in accordance with its terms and is in full force and effect.  Seller has not received any written notice that it is in default or breach of or is otherwise delinquent in performance in any material respect under any Purchased Contract.  To Seller’s Knowledge, each of the other parties thereto has performed in all material respects all obligations required to be performed by it and is not in default in any material respect thereunder.

3.9Real Property

(a)Subschedule 2.2.d to the definitive Schedule 2.2 (Purchased Contracts) attached hereto sets forth (i) a true, accurate and complete list of all of the leases of real property (the “Real Property Leases”) included in the Purchased Contracts and (ii) the street addresses of all of such leased real property.

(b)All rent and other amounts due and payable with respect to the Real Property Leases prior to the date hereof have been paid through the date of this Agreement.

15

3.10Taxes

(a)There are no liens for Taxes upon any of the Purchased Assets, except for liens for Taxes not yet due and payable.

(b)Seller has paid all material Taxes required to be paid by it with respect to the Purchased Assets.

3.11Brokers

No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission from Buyer in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller or any of its Affiliates.

3.12Environmental Matters.

Except as would not reasonably be expected individually or in the aggregate to have a Material Adverse Effect:

(a)Seller is operating the Purchased Assets in compliance with all Environmental Laws;

(b)Seller has not, and, to Seller’s Knowledge, no other person has, used, stored, disposed of, released or managed (whether by act or omission) any Hazardous Substances in a manner that could be expected to result in the owner or operator of the Purchased Assets incurring any liability or expense;

(c)Seller has not received any notice from any Governmental Body that Seller is in violation of any Environmental Law in connection with its operation of the Purchased Assets; and

(d)Seller is not subject to any pending or, to Seller’s Knowledge, threatened Action in connection with the Purchased Assets involving a demand for damages, injunctive relief, penalties or other potential liability with respect to violation of any Environmental Law or Hazardous Substance.

3.13Schedule 2.6

Seller warrants that definitive Schedule 2.6 setting forth the amount calculated as Net Working Capital, and the supporting schedules thereto setting forth the amounts of the components of Net Working Capital, are in each case accurate.

3.14No Knowledge of Misrepresentations or Omissions; No Additional Representations or Warranties

Seller has no Knowledge that the representations and warranties of Buyer contained in this Agreement or any Collateral Agreement are not true and correct.  Seller acknowledges that

16

neither Buyer nor any of its respective Affiliates nor any other Person acting on its behalf has made any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding Buyer or any other matter, except as expressly set forth in this Agreement or as and to the extent required by this Agreement to be disclosed on the Schedules hereto.

3.15No Other Representations

Except for the representations and warranties contained in this Article 3 or in the Collateral Agreements, Seller makes no representations, express or implied, written or oral, and hereby to the maximum extent permitted by law disclaims any such representation or warranty (including any warranty of merchantability or fitness for a particular purpose), whether by Seller, its Affiliates or any of their officers, directors, employees or other agents or representatives or any other Person.

4.REPRESENTATIONS AND WARRANTIES OF BUYER

Except as set forth in the schedule delivered by Buyer to Seller concurrently with the execution of this Agreement (the “Buyer Disclosure Schedule”), each of Buyer and Parent hereby represents and warrants to Seller as of the Closing Date as follows:

4.1Organization and Qualification

Each of Buyer and Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  Buyer has all requisite corporate power and authority to own, lease or license and operate the Purchased Assets and to perform under the Purchased Contracts and the Assumed Liabilities as contemplated by this Agreement and the Collateral Agreements.

4.2Authorization; Binding Effect

(a)Each of Buyer and Parent has all requisite corporate power and authority to execute and deliver this Agreement and each Collateral Agreement to which it is or will be a party and to effect the transactions contemplated hereby and thereby.  The execution, delivery and performance by each of Buyer and Parent of this Agreement and each Collateral Agreement to which it is or will be a party and the consummation by Buyer and Parent, respectively, of the transactions contemplated hereby and thereby have been duly and validly approved by Buyer’s or Parent’s board of directors, and no other corporate actions or proceedings on the part of Buyer or Parent or any affiliate of Buyer or Parent are necessary to authorize the execution, delivery and performance by Buyer or Parent of this Agreement or the Collateral Agreements to which it is or will be a party or the transactions contemplated hereby and thereby.

(b)Each of Buyer and Parent has duly and validly executed and delivered this Agreement and the Collateral Agreements to be delivered at Closing to which it is a party.  Assuming due execution by Seller, this Agreement and each such Collateral Agreement constitutes valid and legally binding obligations of Buyer and Parent, as applicable, enforceable against it in accordance with its respective terms, except as such agreements may

17

be subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws and equitable principles relating to or affecting or qualifying the rights of creditors generally and general principles of equity.

4.3Non-Contravention; Buyer’s Consents

(a)The execution, delivery and performance of this Agreement and the Collateral Agreements by Buyer and Parent, as applicable, and the consummation of the transactions contemplated hereby and thereby do not and will not:

(i)conflict with or result in a breach or violation of any provision of any organizational documents of Buyer or Parent,

(ii)violate or result in a breach of or constitute an occurrence of default under any provision of, result in the acceleration or cancellation of any obligation under, or give rise to a right by any party to terminate or amend its obligations under, any Contract to which Buyer or Parent is a party or by which it or its assets or properties are bound, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) upon any of its assets or properties, which violation, breach, default or Encumbrance would individually or in the aggregate be material to Buyer or Parent or materially impair or delay or prevent the consummation of the transactions contemplated hereby, or

(iii)violate any Law of any Governmental Body having jurisdiction over Buyer or Parent or any of its properties, which violation would individually or in the aggregate be materially adverse to Buyer or Parent.

(b)No consent, authorization, order or approval of, filing or registration with, or waiver of any right of first refusal or first offer from, any Governmental Body or any other Person not party to this Agreement is necessary in connection with the execution, delivery and performance by Buyer and Parent of this Agreement or the Collateral Agreements or the consummation by Buyer of the transactions contemplated hereby or thereby, that has not been obtained except as would not individually or in the aggregate be materially adverse to Buyer or Parent (any such consents, approvals, orders, authorizations, registrations, declarations and filings listed on the Buyer Disclosure Schedule being referred to herein collectively as the “Buyer’s Consents”).

(c)Based on the information disclosed to Buyer and Parent by Seller prior to the Closing Date, each of Buyer and Parent, by its respective board of directors or properly authorized committee thereof, has determined, in good faith and in accordance with 16 C.F.R. Section 801.10(b), that the fair market value of the assets acquired hereunder is less than $50 million; provided, that this representation and warranty is made solely for the purpose of determining the applicability to the transactions contemplated by this Agreement of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

18

4.4Compliance with Laws; Litigation

Except as would not individually or in the aggregate prevent or materially delay the consummation by Buyer or Parent of the transactions contemplated hereby and by the Collateral Agreements,

(a)Buyer is in compliance with all Laws of or from Governmental Bodies; and

(b)There are no Actions pending against Buyer or Parent or, to the Knowledge of either Buyer or Parent, threatened by or against either Buyer or Parent with respect to this Agreement or any of the Collateral Agreements, or in connection with the transactions contemplated hereby or thereby.

4.5No Knowledge of Misrepresentations or Omissions; No Additional Representations or Warranties

Neither Buyer nor Parent has no Knowledge that the representations and warranties of Seller contained in this Agreement or any Collateral Agreement are not true and correct.  Each of Buyer and Parent has conducted its own independent review and analysis of the Purchased Assets, the Purchased Contracts, and the Assumed Liabilities, and Buyer has been provided such access to the personnel, properties, premises and records of Seller relating to the Purchased Assets, the Purchased Contracts, and the Assumed Liabilities as it has requested for such purpose.  Each of Buyer and Parent acknowledges that neither Seller nor any of its Affiliates, or any other Person acting on behalf of Seller (a) has made any representation or warranty, express or implied, including any implied representation or warranty as to the condition, merchantability, suitability or fitness for a particular purpose of any of the Purchased Assets or Purchased Contracts or any other asset or matter, or (b) has made any representation or warranty, express or implied, as to the accuracy or completeness of any information regarding Seller, the Purchased Assets, the Purchased Contracts or the Assumed Liabilities or any other asset or matter, in each case except as expressly set forth in this Agreement or as and to the extent required by this Agreement to be disclosed on the Schedules hereto.

4.6Brokers

No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission from Buyer in connection with the transactions contemplated by this Agreement based on arrangements made by or on behalf of Buyer or Parent or any Affiliate thereof.

4.7No Other Representations

Except for the representations and warranties contained in this Article 4 or in the Collateral Agreements, neither Buyer nor Parent makes no representations, express or implied, written or oral, and hereby to the maximum extent permitted by law disclaims any such representation or warranty (including any warranty of merchantability or fitness for a particular purpose), whether by Buyer or Parent, any of their respective Affiliates or officers, directors, employees or other agents or representatives or any other Person.

19

5.CERTAIN COVENANTS

5.1Access to Information

(a)For a period of three (3) years after the Closing Date, upon reasonable prior written notice, Buyer and Seller shall furnish or cause to be furnished to each other and their employees, agents, auditors and representatives access, during normal business hours, to such information, books and records relating to the Purchased Assets, Purchased Contracts and Assumed Liabilities as is reasonably necessary for financial reporting and accounting matters, the preparation and filing of Tax Returns, reports or forms for the defense of any Tax claims, assessments, audits or disputes, or the prosecution or defense of any Action and shall cooperate with each other to the extent reasonably requested for the preparation of such financial reporting, accounting and Tax matters, provided, that with respect to any Tax Returns or other records relating to Tax matters or any other Action, either party shall have reasonable access to such information until the applicable statute of limitations, if any, shall have expired, and provided, further, that in either case such access shall be subject to reasonable and customary restrictions with respect to confidentiality.  Except as otherwise agreed in writing, each party shall reimburse the other for reasonable out-of-pocket costs and expenses incurred in assisting the other pursuant to this Section 5.1(a).  Each party shall have the right to copy any of such records at its own expense.  Neither party shall be required by this Section 5.1(a) to take any action that would unreasonably interfere with the conduct of its business or unreasonably disrupt its normal operations.

(b)Seller and Buyer each agree to preserve, for at least three (3) years after the Closing Date, all material books, ledgers and other records that are (i) reasonably related to the Purchased Assets or Purchased Contracts and (ii) in their possession; provided, that each party will preserve all such material books, ledgers and other records relating to Tax matters until expiration of the applicable statute of limitations.  After such three (3) years period or expiration of the applicable statute of limitations and at least five (5) days prior to the planned destruction of any such books, ledgers or other records, but in any event no longer than the later of three (3) years after the Closing Date or the expiration of the applicable statue of limitations, the party planning to destroy such books, ledgers or other records shall notify in writing and shall make available to the other, upon its reasonable request, such books, ledgers and other records.

5.2Taxes

(a)Seller and Buyer acknowledge and agree that (i) Seller will be responsible for and will perform all applicable Tax withholding, payment and reporting duties with respect to any wages and other compensation and benefits paid or provided by Seller to any Hired Employee for a taxable period or portion thereof ending on or prior to the respective New Hire Date, and (ii) Buyer will be responsible for and will perform all Tax withholding, payment and reporting duties with respect to any wages and other compensation and benefits paid or provided by Buyer or any of its Affiliates to any Hired Employee for any taxable period or portion thereof beginning on or after the respective New Hire Date.

20

(b)Buyer and Seller shall use reasonable efforts to agree upon an allocation of the Purchase Price (including the amount of Assumed Liabilities that are liabilities for federal income tax purposes) among the Purchased Assets and, to the extent applicable, Purchased Contracts (the “Allocation Agreement”), consistent with Section 1060 of the Code and the Treasury Regulations thereunder. The Allocation Agreement shall contain such additional terms pertaining to Tax reporting and such other matters as Buyer and Seller may agree.  If Buyer and Seller are unable to agree upon an allocation of the Purchase Price within thirty (30) days following the Closing Date, Buyer and Seller shall each be permitted to allocate the Purchase Price in accordance with their independent determinations and to file their Tax Returns consistently therewith.

(c)Following the Closing, Buyer and Seller shall cooperate fully with respect to all Tax matters, including any disputes with any Governmental Body concerning the allocation of the Purchase Price hereunder.

(d)All sales, use, transfer, filing, recording, registration, excise, privilege, stamp or similar Taxes that may be imposed by or payable to any Governmental Body by reason of the transactions contemplated by this Agreement and the Collateral Agreements shall be paid by Buyer.  Seller shall cooperate reasonably with Buyer in timely making and filing all filings, reports and forms as may be required with respect to any Taxes described in the preceding sentence.

(e)Seller shall be responsible for income Taxes and franchise Taxes (to the extent based on net income) imposed on Seller as result of the transactions contemplated by this Agreement and the Collateral Agreements.

(f)The liability of Seller for real, personal and intangible personal property Taxes related to the Purchased Assets and Purchased Contracts shall be equal to the amount of all such property Taxes based on assessments made by the relevant Governmental Body or Tax filings made by Seller prior to the Closing Date, regardless of the period to which such Taxes relate.  The liability of Buyer for real, personal and intangible personal property Taxes related to the Purchased Assets and Purchased Contracts shall be equal to the amount of all such property Taxes based on assessments made by the relevant Governmental Body or Tax filings made by Buyer on or following the Closing Date, regardless of the period to which such Taxes relate.  As a result no allocating or prorating of property Tax invoices or liabilities between the Parties will be conducted.  Each of Buyer and Seller agrees that the liability of the Parties for Taxes subject to this Section 5.2(f) shall be paid promptly by the party liable for such Tax to the appropriate Governmental Body.  The party paying such liability to the applicable Governmental Body shall provide proof of such payment promptly upon reasonable request by the other party.

5.3Employees; Employee Benefits

Buyer shall, and Seller shall permit Buyer to, interview the employees of Seller identified on Attachment I (the “Identified Employees”) and make offers of employment to each of the Identified Employees in accordance with, and pursuant to the terms and conditions described in, Attachment I.  Any Identified Employee who accepts any such offer of employment extended by Buyer shall be referred to herein as a “Hired Employee.”  The employment by Buyer of each

21

Hired Employee shall commence upon a date agreed by Seller (the actual date that the Hired Employee commences employment with Buyer being referred to herein at such Hired Employee’s “New Hire Date”).

5.4Regulatory Compliance

Seller and Buyer shall use their reasonable best efforts to take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement as promptly as practicable, including to:

(i)obtain from Governmental Bodies any consents, licenses, permits, waivers, approvals, authorizations or orders required to (A) be obtained or made by Seller or Buyer or any of their Affiliates to consummate the transactions contemplated by this Agreement or (B) avoid any action or proceeding by any Governmental Body in connection with the authorization, execution and delivery of this Agreement and permit the consummation of the transactions contemplated hereby to occur as soon as reasonably possible, and

(ii)promptly make all necessary filings, and thereafter make any other required submissions, with respect to this Agreement required under any applicable Law.  Seller and Buyer shall cooperate with each other in connection with the making of all filings referenced in the preceding sentence.

Seller and Buyer each shall bear its own costs and expenses in connection with its performance under this Section 5.4.

5.5Inadvertent Payments and Transfers

In the event that record or beneficial ownership or possession of any Excluded Asset or Excluded Liability, or payment of any amount to which Buyer is not entitled, is for any reason transferred to, or otherwise received by, Buyer on or after the Closing Date, Seller and Buyer shall use their reasonable best efforts to transfer or return, or cause to be transferred or returned, to Seller as promptly as practicable such payment, Excluded Asset or Excluded Liability, and pending such transfer or return to Seller, Buyer shall hold such payment, Excluded Asset or Excluded Liability and use commercially reasonable efforts to provide to Seller all of the benefits and liabilities associated with the ownership and operation of such payment, Excluded Asset or Excluded Liability and, accordingly, Buyer shall cause such payment, Excluded Asset or Excluded Liability to be applied, operated or retained as may reasonably be instructed by Seller.  In the event that any party to any of the Purchased Contracts after the date hereof delivers to Seller any funds that pursuant to the terms hereof are to be paid to Buyer, Seller shall pay such funds to Buyer as soon as reasonably practical after Seller obtains Knowledge of the receipt thereof.

5.6Additional Covenants

(a)For and in consideration of the transactions contemplated in this Agreement and the Collateral Agreements, Seller shall, until the three-year anniversary of the Closing Date, not solicit, directly or through any Affiliate of Seller, for the provision solely in

22

the Applicable Geographic Area (as defined below)(1) of internet access services similar to the services provided under the Customer Contracts and assumed by Buyer pursuant to this Agreement (the “Services”), any of the customers under the Customer Contracts; provided, that this provision shall not prevent Seller (or any Affiliate of Seller) from conducting general solicitations for customers by use of advertisements or the media that are not directly targeted at such customers. As used herein, “Applicable Geographic Area” means the Local Access and Transport Area (LATA) within which the Point of Presence (POP) is located from which a customer is receiving Services under the applicable Customer Contract as of the Closing Date.

(b)For and in consideration of the transactions contemplated in the Agreement and the Collateral Agreements, Buyer shall, until the two-year anniversary of the Closing Date, purchase from Seller, on Seller’s customary terms and conditions, all web hosting services to be resold by Buyer to any third party (including any customer under the Purchased Contracts) that authorizes Buyer on its behalf to acquire web hosting services solely in North America; provided, that Seller shall have responded properly in a timely manner to any requests for bids with respect to such services to be provided on behalf of such third party and shall have met or exceeded all material terms proposed by any other service provider bidding on such services; and provided, further, that Buyer shall not be required to purchase such services from Seller if Buyer determines in good faith that it is commercially impracticable or otherwise inadvisable to do so or that it is required by law or required or requested by the third party not to do so or to use a third party, including as a result of Buyer’s commitments with other providers.

5.7Confidentiality

(a)For a period of three (3) years after the Closing Date, Seller will not, and Seller will use reasonable commercial efforts to cause its Affiliates not to, use for its or their own benefit or divulge or convey to any Third Party, any Confidential Information relating to the Purchased Assets or Assumed Liabilities.

(b)Notwithstanding the foregoing, Seller shall not be deemed to have violated this Section 5.7 if Seller or any of its Affiliates receives a request to disclose all or any part of the Confidential Information under the terms of a subpoena, civil investigative demand or order issued by a Governmental Body, and Seller or such Affiliate, to the extent not inconsistent with such request and to the extent time reasonably allows:  (i) notifies Buyer of the existence, terms and circumstances surrounding such request; (ii) consults with Buyer on the advisability of taking legally available steps to resist or narrow such request; and (iii) if disclosure of any Confidential Information is advisable, to prevent such Seller or such Affiliate or any of its or their partners, principals or employees from becoming subject to any penalty, to furnish only such portion of the Confidential Information as it reasonably determines that Seller or such Affiliate is legally obligated to disclose and to exercise reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to the disclosed Confidential Information.

(1)   This schedule will reference the geographic areas represented by the customer contracts being transferred to Buyer in this transaction.

23

(c)For purposes of this Agreement, “Confidential Information” consists of all information, knowledge or data related solely to the Purchased Assets, Purchased Contracts or Assumed Liabilities not in the public domain or otherwise publicly available which are treated as confidential by Seller as of the date hereof, provided, that Confidential Information shall not include information that:  (i) enters the public domain or is or becomes publicly available, so long as neither Seller nor any of its respective Affiliates, directly or indirectly, improperly causes such information to enter the public domain, (ii) after the date of this Agreement becomes known to Seller or any of its Affiliates on a nonconfidential basis from a source that, to Seller’s Knowledge, is not prohibited from disclosing such information to Seller or such Affiliate by a contractual or other legal duty owed to Buyer, or (iii) after the date of this Agreement is developed independently by Seller or any Affiliate of Seller without violation of this Agreement.

6.CLOSING

6.1Closing

The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Morrison & Foerster LLP in Denver, Colorado, concurrently with the execution of this Agreement; provided, that such closing shall be effective as of 12:00 midnight Central Time on November 30, 2004, (such date and time being referred to herein as the “Closing Date”).

6.2Deliveries by Seller

Unless otherwise specified below, concurrently with the execution of this Agreement, Seller is delivering to Buyer the following:

(a)a bill of sale for the Purchased Assets substantially in the form of Exhibit A (the “Bill of Sale”), duly executed by Seller; and

(b)within 7 business days following the Closing Date, originals of all of the written Contracts that constitute Purchased Contracts other than the Subsequently Assigned Contracts.

6.3Deliveries by Buyer

Concurrently with the execution of this Agreement, Buyer is delivering to Seller the Purchase Price.

6.4Additional Agreements

Concurrently with the execution of this Agreement, Buyer and Seller, as applicable, are entering into the following agreements,

(a)the Assignment and Assumption Agreement in the form of Exhibit B (the “Assumption Agreement”);

24

(b)the Seller Access Agreement in the form of Exhibit C (the “Seller Access Agreement”);

(c)the Transition Services Agreement, in the forms of Exhibit D (the “Transition Services Agreement”);

(d)the Buyer Customer Service Agreement in the form of Exhibit E (the “Buyer Customer Service Agreement”).

6.5Contemporaneous Effectiveness

All acts and deliveries prescribed by this Section 6, regardless of chronological sequence, will be deemed to occur contemporaneously and simultaneously on the occurrence of the last act or delivery, and none of such acts or deliveries will be effective until the last of the same has occurred.

7.JOINT AND SEVERAL OBLIGATIONS

Parent hereby agrees that it is and shall be jointly and severally obligated with Buyer for each and every representation, warranty, liability, covenant, agreement and other obligation of Buyer under this Agreement and each of the Collateral Agreements.  In furtherance, and not in limitation, of the foregoing, Buyer and Parent acknowledge and agree that Seller may proceed against either or both of Parent and Buyer with respect to each and every such representation, warranty, liability, covenant, agreement or other obligation without first proceeding against the other, regardless of whether or not Seller has made any demand on Buyer or Parent, as the case may be, and Parent agrees to make or perform each such representation, warranty, liability, covenant, agreement and other obligation as if it were Buyer.  Each of Parent and Buyer further acknowledges and agrees that Seller may rely upon, and is relying upon, this Article 7 in entering into this Agreement and the Collateral Agreements.

8.SURVIVAL AND INDEMNITY

The rights and obligations of Buyer and Seller under this Agreement shall be subject to the following terms and conditions:

8.1Survival of Representations and Warranties

The representations and warranties of Buyer and Seller contained in this Agreement and in any Collateral Agreement shall survive the Closing for twelve (12) months, except (i) the Tax Warranties, which shall survive for the applicable statutes of limitations, and (ii) the Title and Authorization Warranties, which shall survive forever.  Neither Seller nor Buyer shall have any liability whatsoever with respect to any such representations or warranties unless a claim is made hereunder prior to expiration of the survival period for such representation or warranty.

8.2General Agreement to Indemnify

(a)Seller and Buyer (whichever has the obligation to indemnify, defend and hold harmless, the “Indemnifying Party”) shall indemnify, defend and hold harmless the other

25

party hereto and their Affiliates and any employee, representative, agent, director, officer, partner or principal, as applicable, or assign of such party and their Affiliates (each, an “Indemnified Party”) from and against any and all liabilities, losses, damages, costs and expenses (including reasonable attorneys’ fees and costs) (collectively, “Losses”) incurred by any Indemnified Party related to, or arising out of or resulting from:

(i)any breach of or any inaccuracy in any representation or warranty of the Indemnifying Party contained in this Agreement or any Collateral Agreement, or

(ii)any breach by the Indemnifying Party of any covenant or agreement of such party contained in this Agreement or any Collateral Agreement.

Buyer further shall indemnify, defend and hold harmless Seller and its Affiliates and any employee, representative, agent, director, officer, partner or principal, as applicable, or assign of Seller and its Affiliates from and against any Losses related to, or arising out of or resulting from right-to-use licensing or certification with respect to the Purchased Assets on or after the Closing Date.

(b)Whether or not the Indemnifying Party chooses to defend or prosecute any Third Party Claim, both parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, and make available such employees, as may be reasonably requested in connection therewith, except that nothing herein shall permit Seller, or require Buyer as a condition to obtaining indemnification, to seek to collect back sales or use Tax from clients or customers in connection with the Purchased Assets.

(c)The indemnification obligations of each party hereto under this Article 8 shall inure to the benefit of the Affiliates of the other party and the employees, representatives, agents, directors, officers, partners and principals, as applicable, of the other party hereto and their Affiliates on the same terms as are applicable to such other party.

(d)Seller’s and Buyer’s liability for all claims made under Section 8.2(a)(i) shall be subject to the following limitations:

(i)Seller or Buyer shall have no liability for any Losses unless the aggregate of all Losses for which Seller or Buyer would, but for this provision, be liable exceeds on a cumulative basis an amount equal to $50,000 (the “Threshold”), provided, that if such Losses of Seller or Buyer on a cumulative basis exceed the Threshold, Buyer or Seller, as the case may be, shall be entitled to indemnification hereunder only to the extent of such excess;

(ii)Seller’s or Buyer’s aggregate liability for all Losses shall in no event exceed $1,000,000 (the “Cap”); and

(iii)no Indemnified Party may make a claim for indemnification under Section 8.2(a)(i) for breach by the Indemnifying Party of a particular representation or warranty after the expiration of the survival period specified in Section 8.1.

26

(e)The amount of any Loss for which indemnification is provided under this Section 8 shall be net of any amounts recovered or recoverable by the Indemnified Party under insurance policies with respect to such Loss.

(f)Notwithstanding anything herein or in the Collateral Agreements to the contrary, neither of the parties hereto or thereto shall be liable to the other, whether in contract, tort or otherwise, for any special, indirect, incidental, consequential, punitive or exemplary or other similar type of damages whatsoever, which in any way arise out of, relate to, or are a consequence of, its performance or nonperformance hereunder or the Collateral Agreements (other than through fraud), including loss of profits, business interruptions and claims of customers.

(g)Each party further acknowledges and agrees that its sole and exclusive remedy with respect to any and all claims relating to this Agreement, the Collateral Agreements, the transactions contemplated hereby, the Purchased Assets and its assets, liabilities and business (other than claims of, or causes of action arising from, fraud) shall be pursuant to the indemnification provisions set forth in this Article 8.  In furtherance of the foregoing, each party hereby waives and releases, from and after the Closing, any and all rights, claims and causes of action (other than claims of, or causes of action arising from, fraud) it may have against the other party and its Affiliates arising under or based upon any Federal, state, local or foreign statute, law, ordinance, rule or regulation or otherwise (except pursuant to the indemnification provisions set forth in this Article 8) arising out of or related to this Agreement and the Collateral Agreements.  Subject to the terms of the Escrow Agreement, the Buyer may satisfy any indemnification claims by offset against the Escrow Amount.  The preceding sentence shall not be deemed to limit Buyer’s right to seeking additional remedies against Seller for indemnification claims hereunder.  Notwithstanding the foregoing, nothing in this Section 8.2(g) or elsewhere in this Agreement shall be deemed to limit any party’s right to seek specific performance or other equitable relief in any court of competent jurisdiction of its rights and remedies hereunder or in any Collateral Agreement.

8.3General Procedures for Indemnification

(a)In order for the Indemnified Party to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a claim or demand made by any person against the Indemnified Party (a “Third Party Claim”) or any other indemnifiable claim, such Indemnified Party must notify the Indemnifying Party in writing, and in reasonable detail, of the Third Party Claim or other claim as promptly as reasonably practical, and in any event within fourteen (14) Business Days, after receipt by such Indemnified Party of written notice of the Third Party Claim or actual notice of any other indemnifiable claim; provided, that the failure of the Indemnified Party to give notice in the manner specified above shall not relieve the Indemnifying Party of its obligations under this Article 8 except to the extent (if any) that the Indemnified Party shall have been actually prejudiced thereby.

(b)If a Third Party Claim is made against an Indemnified Party, the Indemnifying Party shall be entitled to participate in the defense thereof and to assume the defense thereof with counsel selected by the Indemnifying Party which is reasonably

27

satisfactory to the Indemnified Party.  Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall not be liable to the Indemnified Party for legal expenses subsequently incurred by the Indemnified Party in connection with the defense thereof, unless the Indemnified Party reasonably determines (with the advice of its counsel) that representation by the Indemnifying Party’s counsel of both the Indemnifying Party and the Indemnified Party would present such counsel with a conflict of interest, in which case such Indemnified Party may employ separate counsel to represent or defend it in any such claim, action, suit or proceeding and the Indemnifying Party shall pay the reasonable fees and disbursements of such separate counsel.  The Indemnifying Party shall be liable for the fees and expenses of counsel employed by the Indemnified Party for any period during which the Indemnifying Party has failed to assume the defense thereof (other than during the period prior to the time the Indemnified Party shall have given notice of the Third Party Claim as provided above).  All reasonable attorneys’ fees and expenses shall count towards the Losses that are subject to indemnity limit specified in Section 8.2(d).

(c)If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate in the defense thereof and to employ counsel, at its own expense (subject to the preceding sentence), separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party shall control such defense.

(d)If the Indemnifying Party so elects to assume the defense of any Third Party Claim, all of the Indemnified Parties shall reasonably cooperate with the Indemnifying Party in the defense or prosecution thereof.  Such cooperation shall include the retention and (upon the Indemnifying Party’s request) the provision to the Indemnifying Party of records and information that are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

(e)Whether or not the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld).  If the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall agree to any settlement, compromise or discharge of such Third Party Claim that the Indemnifying Party shall recommend that provides for complete release of the Indemnified Party, provided, that such settlement, compromise or discharge does not require any expenditures on the part of Buyer and does not include any equitable award or relief.

(f)Each of Seller and Buyer shall make commercially reasonable efforts to mitigate any claim or other liability with respect to which one party is obligated to indemnify the other party hereunder.

28

9.MISCELLANEOUS PROVISIONS

9.1Notices

Except as otherwise provided herein or in a Collateral Agreement, all notices and other communications hereunder and under the Collateral Agreements shall be in writing and shall be deemed to have been duly given upon receipt if (i) mailed by certified or registered mail, return receipt requested, (ii) sent by a nationally recognized overnight delivery service (receipt requested), fee prepaid, (iii) sent via facsimile with receipt confirmed, or (iv) delivered personally, addressed as follows or to such other address or addresses of which the respective party shall have notified the other.

(a)If to Seller, to:

Verio Inc.
8005 South Chester St., Ste. 200
Englewood, CO 80112
Attention:  Chief Financial Officer
Fax:  (303) 708-2494

With a copy to:

Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
Attention:  Gavin B. Grover
Fax:  (415) 268-7522

(b)If to Buyer, to:

SFX Acquisition, Inc.
1015 31^st Street, N.W.
Washington, D.C. 20007

Attention: General Counsel
Fax:  (202) 338-8798

With a copy to:

Latham & Watkins LLP
555 Eleventh Street, Suite 1000

Washington, D.C. 20004

Attention: David McPherson
Fax:  (202) 637-2201

29

(c)If to Parent, to:

Cogent Communications, Inc.
1015 31^st Street, N.W.
Washington, D.C. 20007
Attention: General Counsel
Fax:  (202) 338-8798

With a copy to:

Latham & Watkins LLP
555 Eleventh Street, Suite 1000
Washington, D.C. 20004
Attention: David McPherson
Fax:  (202) 637-2201

9.2Expenses

Except as otherwise provided in this Agreement or the Collateral Agreements, each party will pay its own costs and expenses, including legal and accounting expenses, related to the transactions contemplated by this Agreement and the Collateral Agreements, irrespective of when incurred.

9.3Entire Agreement

The agreements of Seller and Buyer, which is comprised of this Agreement, the Schedules and Exhibits hereto and the documents referred to herein, including the Collateral Agreements, sets forth the entire agreement and understanding between the parties and supersedes any prior agreement or understanding, written or oral, relating to the subject matter of this Agreement and the Collateral Agreements.

9.4Waiver of Jury Trial

Each of the parties irrevocably waives the right to a jury trial in connection with any legal proceeding relating to this Agreement or any of the Collateral Agreements or the enforcement of any provision hereof or thereof.

9.5Governing Law

This Agreement and the Collateral Agreements will be construed in accordance with and governed by the internal laws of the State of New York applicable to agreements made and to be performed entirely within such State without regard to conflicts of laws principles thereof.

30

9.6Waiver

The rights and remedies of the parties to this Agreement and the Collateral Agreements are cumulative and not alternative.  Neither the failure nor any delay by any party in exercising any right, power or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege.  To the maximum extent permitted by Law, (a) no claim or right arising out of this Agreement or the Collateral Agreements can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given and will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure or noncompliance; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the Collateral Agreements.

9.7No Oral Modification

Neither this Agreement nor any Collateral Agreement may be amended except by a written agreement executed by all of the parties hereto or thereto.  Any attempted amendment in violation of this Section 9.7 will be void ab initio.

9.8Assignments; Successors

No party may assign any of its rights under this Agreement or any Collateral Agreements without the prior written consent of the other parties hereto or thereto.  Subject to the preceding sentence, this Agreement and the Collateral Agreements will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties.

9.9Severability

If any provision of this Agreement or the Collateral Agreements is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement and the Collateral Agreements will remain in full force and effect; provided, that the court making such determination shall have the power to and shall, subject to the discretion of such court, reduce the scope, duration, area or applicability of such provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable provision with a provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.

9.10Specific Performance

Each party recognizes and affirms that in the event of breach by him or it of any of the provisions of Sections 5.6 or 5.7 money damages would be inadequate and the other parties would have no adequate remedy at law.  Accordingly, each party agrees that the other parties shall have the right, in addition to any other rights and remedies existing in their favor, to enforce their respective rights and the breaching party’s obligations under Sections 5.6 or 5.7 not only by

31

an action or actions for damages, but also by an action or actions for specific performance, injunction and/or other equitable relief in order to enforce or prevent any violations (whether anticipatory, continuing or future) of the provisions of Sections 5.6 or 5.7.

9.11Limitations on Public Disclosure

Buyer and Parent shall consult with Seller before issuing any press release, or making any public announcement or filing with a Governmental Body, with respect to this Agreement or any Collateral Agreement and shall not issue any such press release, or make any such public statement or filing without the prior consent of Seller, which shall not be unreasonably withheld or delayed; provided, that Parent may, without the prior consent of Seller, issue such press release, or make such public statement or filing, as may upon the advice of counsel be required by Law if it has used reasonable efforts to consult with Seller.

9.12No Third Party Beneficiaries

Nothing in this Agreement or the Collateral Agreements, express or implied, is intended to or shall constitute the parties hereto as partners or as participants in a joint venture.  This Agreement is solely for the benefit of the parties hereto and, only to the extent provided in Section 8 hereof, their respective Affiliates and employees, representatives, agents, directors, officers, partners or principals, as applicable, or their respective assigns, for whom the parties shall be entitled to enforce this Agreement, and no provision of this Agreement shall be deemed to confer upon any other Third Parties any remedy, claim, liability, reimbursement, cause of action or other right.  Nothing in this Agreement or the Collateral Agreements shall be construed as giving to any Identified Employee, or any other individual, any right or entitlement under any Benefit Plan, policy or procedure maintained by Seller.

9.13Time of the Essence

With regard to all dates and time periods set forth or referred to in this Agreement and the Collateral Agreements, time is of the essence.

9.14Counterparts

This Agreement and the Collateral Agreements each may be executed simultaneously in two or more counterparts, each of which will be deemed to be an original copy hereof or thereof and all of which together will be deemed, respectively, to constitute one and the same agreement.

9.15Waiver of Compliance with Bulk Transfer Laws

Buyer hereby waives compliance by Seller with the provisions of any bulk transfer laws that may be applicable to the transactions contemplated hereby and by the Collateral Agreements.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

32

IN WITNESS WHEREOF, each party has caused this Agreement to be duly executed on its behalf by its duly authorized officers as of the date first written above.

SELLER:
VERIO INC.
By:		/s/ Calvin Quan
					Name: Calvin Quan
					Title: Chief Financial Officer
BUYER:
SFX ACQUISITION, INC.
By:	/s/ Dave Schaeffer
				Name: Dave Schaeffer
				Title: President
PARENT:
COGENT COMMUNICATIONS, INC.
By:		/s/ Dave Schaeffer
			Name: Dave Schaeffer
			Title: President

EX-3.1

Exhibit 3.1

FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

COGENT COMMUNICATIONS GROUP, INC.

Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware

(Originally incorporated under the same name on December 12, 2000)

Cogent Communications Group, Inc., (the “Corporation”), a corporation organized and existing under, and by virtue, of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”), DOES HEREBY CERTIFY AS FOLLOWS:

1.That the name of the Corporation is Cogent Communications Group, Inc.

2.That on February 18, 2005 the Board of Directors duly adopted resolutions proposing to amend and restate the certificate of incorporation of this Corporation, declaring said amendment and restatement to be advisable and in the best interests of this Corporation and its stockholders, and authorizing the appropriate officers of this Corporation to solicit the approval of the stockholders therefor.

3.That in lieu of a meeting and vote of stockholders, consents in writing have been signed by holders of outstanding stock having not less than the minimum number of votes that is necessary to consent to this amendment and restatement, and, if required, prompt notice of such action shall be given in accordance with the provisions of Section 228 of the General Corporation Law.

4.This Fifth Amended and Restated Certificate of Incorporation restates and integrates and further amends the certificate of incorporation of the Corporation, as heretofore amended or supplemented.

5.This Fifth Amended and Restated Certificate of Incorporation shall be effective as of 12:01 a.m. Eastern Time on March 24, 2005

The text of the Corporation’s certificate of incorporation is amended and restated in its entirety as follows:

ARTICLE 1. NAME.

The name of the Corporation is Cogent Communications Group, Inc.

ARTICLE 2. REGISTERED OFFICE AND AGENT.

The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, in the County of New Castle, 19808, Delaware. The name of its registered agent at such address is Corporation Service Company.

ARTICLE 3. PURPOSE.

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

ARTICLE 4. CAPITAL STOCK.

A.Authorized Shares.  Effective as of 12:01 a.m. Eastern Time on March 24, 2005, (the “Reverse Split Effective Time”), there shall be a twenty (20) into one (1) reverse stock split of the

Corporation’s Common Stock, whereby every twenty (20) shares of the Corporation’s Common Stock, par value $.001 per share, issued and outstanding immediately prior to the Reverse Split Effective Time shall be combined into one (1) share of Common Stock, par value $.001 per share.

The total number of shares of capital stock of all classes that the Corporation will have the authority to issue is seventy five million ten thousand (75,010,000) shares, of which: (i) seventy five million (75,000,000) shares, of a par value of $.001 per share, shall be of a class designated “Common Stock”; and (ii) ten thousand (10,000) shares, of a par value of $.001 per share, of authorized but unissued Preferred Stock.

The authorized but unissued Preferred Stock may be issued in one or more series, each series to be appropriately designated by a distinguishing letter or title prior to the issue of any shares thereof. The Board of Directors is hereby authorized to fix or alter the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption including sinking fund provisions, if any, the redemption price or prices, the liquidation preferences, any other qualifications, limitations, or restrictions thereof, of any wholly unissued series of Preferred Stock, and the number of shares constituting any such unissued series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

Except as otherwise set forth in a certificate designating any authorized but unissued Preferred Stock (such certificate, a “Certificate of Designation”), the designations, preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions of the Preferred Stock and the Common Stock shall be as follows:

B.Preferred Stock.  Except as otherwise required by the General Corporation Law or as provided in the Certificate of Designation relating to such series of Preferred Stock, shares of Preferred Stock shall be voted together with the shares of the Common Stock without distinction as to class or series at each annual or special meeting of stockholders of the Corporation, and may act by written consent in the same manner as the Common Stock, upon the following basis: each holder of a share of Preferred Stock will be entitled to one vote for each share of Common Stock such holder of Preferred Stock would receive upon conversion of such share of Preferred Stock held by such stockholder into Common Stock. Such determination shall be made with (1) respect to a meeting of the stockholders of the Corporation on the record date fixed for meeting, or (2) with respect to a written consent of the stockholders of the Corporation, on the effective date of such written consent.

C.Common Stock.

1.  Prior Rights of Preferred Stock.  The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of any series of Preferred Stock as may be issued in accordance with the provisions hereof.

2.  Voting Rights.  The holders of the Common Stock are entitled to one vote for each share held at all meetings of stockholders. There shall be no cumulative voting.

3.  Dividends.  Subject to the rights of any series of Preferred Stock set forth in a certificate of designation, dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock.

4.  Increases or Decreases.  Subject to the rights of any series of Preferred Stock set forth in a certificate of designation, the number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock then outstanding or reserved for conversion of the then outstanding Preferred Stock) by the affirmative vote of the holders of a majority of the outstanding stock of the Corporation (voting together on an as-if converted basis).

ARTICLE 5. COMPROMISE OR ARRANGEMENT WITH CREDITORS.

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application had been made, be binding on all the creditors or class of creditor, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.

ARTICLE 6. DIRECTORS LIABILITY; INDEMNIFICATION.

A.Indemnification.  The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law, as the same may be amended and supplemented from time to time, indemnify and advance expenses to, (i) its directors and officers, and (ii) any person who, at the request of the Corporation is or was serving as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section as amended or supplemented (or any successor), for actions taken in such person’s capacity as such a director, officer, employee or agent, and then only to the extent such person is not indemnified for such actions by such other corporation, partnership, joint venture, trust or other enterprise; provided, however, that except with respect to proceedings to enforce rights to indemnification, the by-laws of the Corporation may provide that the Corporation shall indemnify any director, officer or such person in connection with a proceeding (or part thereof) initiated by such director, officer or such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The Corporation, by action of its Board of Directors, may provide indemnification or advance expenses to employees and agents of the Corporation or other persons only on such terms and condition and to the extent determined by the Board of Directors in its sole and absolute discretion. The indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

B.Limitation of Liability.  No director of this Corporation shall be personally liable to the Corporation or its stockholders for any monetary damages for breaches of fiduciary duty as a director, notwithstanding any provision of law imposing such liability; provided that this provision shall not eliminate or limit the liability of a director, to the extent that such liability is imposed by applicable law, (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law (iii) under Section 174 or successor provisions of the General Corporation Law; or (iv) for any transaction from which the director derived an improper personal benefit. This provision shall not eliminate or limit the liability of a director for any act or omission if such elimination or limitation is prohibited by the General Corporation Law. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. If the General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law, as so amended.

C.Prospective Amendment.  Any repeal or modification of this Article 6 shall be prospective and shall not affect the rights under this Article 6 in effect at the time of the alleged occurrence of any act or Omission to act giving rise to liability or indemnification.

Executed in the name of the Corporation by its Chief Executive Officer and Chairman of the Board, who declares, affirms, acknowledges and certifies under penalties of perjury, that this is his free act and deed and the facts stated herein are true.

Dated: March 18, 2005

COGENT COMMUNICATIONS GROUP, INC.

/s/ David Schaeffer

David Schaeffer

Chairman and Chief Executive Officer

EX-10.2

Exhibit 10.2

COGENT COMMUNICATIONS GROUP, INC.

SEVENTH AMENDED AND RESTATED

REGISTRATION RIGHTS AGREEMENT

October 26, 2004

To each of the several holders of Series F Preferred Stock (the “Series F Purchasers”), each sub-series of Series G Preferred Stock (collectively, the “Series G Purchasers”), Series I Preferred Stock (the “Series I Purchasers”), Series J Preferred Stock (the “Series J Purchasers”), Series K Preferred Stock (the “Series K Purchasers”), Series L Preferred Stock (the “Series L Purchasers”), Series M Preferred Stock (the “Series M Purchasers”) and any person who later becomes a party to this Agreement by executing and delivering to the Company an Instrument of Accession in the form of Schedule II hereto (collectively, the “Purchasers”):

Dear Sirs:

This will confirm that the Company covenants and agrees with each of you as follows:

1.Certain Definitions.  As used in this Agreement, the following terms shall have the following respective meanings:

“Commission” shall mean the Securities and Exchange Commission, or any other federal agency at the time administering the Securities Act.

“Common Stock” shall mean the Common Stock, par value $.001 per share, of the Company, as constituted as of the date of this Agreement.

“Company” shall mean Cogent Communications Group, Inc.

“Conversion Shares” shall mean shares of Common Stock issued or issuable upon conversion of the Preferred Stock, and any shares of capital stock received in respect thereof.

“Exchange Act” shall mean the Securities Exchange Act of 1934 or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

“Preferred Stock” shall mean the Series F Preferred Stock, the Series G Preferred Stock, the Series I Preferred Stock, the Series J Preferred Stock and the Series K Preferred Stock, Series L Preferred Stock, Series M Preferred Stock and any other series of preferred stock held by a person or entity that becomes a party to this Agreement pursuant to an Instrument of Accession, a form of which is attached hereto as Schedule II.

“Registration Expenses” shall mean the expenses so described in Section 8.

“Restricted Stock” shall mean (i) the Conversion Shares, excluding Conversion Shares which have been (a) registered under the Securities Act pursuant to an effective registration statement filed thereunder and disposed of in accordance with the registration statement covering them or (b) publicly sold pursuant to Rule 144 under the Securities Act, and (ii) any shares of Common Stock issued or distributed in respect of the securities described in clause (i).

“Securities Act” shall mean the Securities Act of 1933 or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

“Selling Expenses” shall mean the expenses so described in Section 8.

“Series F Preferred Stock” shall mean the Series F Participating Convertible Preferred Stock, par value $.001 per share, of the Company, constituted as of July 31, 2003.

“Series G Preferred Stock” shall mean the Series G Participating Convertible Preferred Stock of the Company, constituted as of July 31, 2003.

“Series I Preferred Stock” shall mean the Series I Participating Convertible Preferred Stock of the Company, constituted as of January 5, 2004.

“Series J Preferred Stock” shall mean the Series J Participating Convertible Preferred Stock of the Company, constituted as of March 30, 2004.

“Series K Preferred Stock” shall mean the Series K Participating Convertible Preferred Stock of the Company constituted as of August 12, 2004.

“Series L Preferred Stock” shall mean the Series L Participating Convertible Preferred Stock of the Company, issued as of September 15, 2004.

“Series M Preferred Stock” shall mean the Series M Participating Convertible Preferred Stock of the Company, issued as of the date of this Agreement.

2.Restrictive Legend.  Each certificate representing Preferred Stock, Conversion Shares or Restricted Stock shall, except as otherwise provided in this Section 2 or in Section 3, be stamped or otherwise imprinted with a legend substantially in the following form:

“The securities represented by this certificate have not been registered under the Securities Act of 1933 or applicable state securities laws.  These securities have been acquired for investment and not with a view to distribution or resale, and may not be sold mortgaged, pledged, hypothecated or otherwise transferred without an effective registration

statement for such securities under the Securities Act of 1933 and applicable state securities laws, or the availability of an exemption from the registration provisions of the Securities Act of 1933 and applicable state securities laws.”

A certificate shall not bear such legend if in the opinion of counsel reasonably satisfactory to the Company the securities being sold thereby may be publicly sold without registration under the Securities Act.

3.Notice of Proposed Transfer.  Prior to any proposed transfer of any Preferred Stock, Conversion Shares or Restricted Stock (other than under the circumstances described in Sections 4, 5 or 6), the holder thereof shall give written notice to the Company of its intention to effect such transfer.  Each such notice shall describe the manner of the proposed transfer and, if requested by the Company, shall be accompanied by an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act, whereupon the holder of such stock shall be entitled to transfer such stock in accordance with the terms of its notice; provided, however, that no such opinion of counsel shall be required for a transfer to one or more partners of the transferor (in the case of a transferor that is a partnership), to one or more members of the transferor (in the case of a transferor that is a limited liability company) or to an affiliated corporation (in the case of a transferor that is a corporation);  provided, further, however, that any transferee other than a partner, member or affiliate of the transferor shall execute and deliver to the Company a representation letter in form reasonably satisfactory to the Company’s counsel to the effect that the transferee is acquiring Restricted Stock for its own account, for investment purposes and without any view to distribution thereof.  Each certificate for Preferred Stock or Conversion Shares transferred as above provided shall bear the legend set forth in Section 2, except that such certificate shall not bear such legend if (i) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act) or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an affiliate of the Company) would be entitled to transfer such securities in a public sale without registration under the Securities Act.  The restrictions provided for in this Section 3 shall not apply to securities which are not required to bear the legend prescribed by Section 2 in accordance with the provisions of that Section.

4.Required Registration.

(a)Subject to Section 13(f) of this Agreement, at any time after the earlier of (i) July 31, 2006 and (ii) the date that is six (6) months after the first public offering after the date hereof of securities by the Company, holders of Restricted Stock constituting more than 50% of the total number of shares of Restricted Stock then outstanding may request the Company to register under the Securities Act all or any portion of the shares of Restricted Stock held by such requesting holder or holders for sale in the manner specified in such notice.  For purposes of this Section 4 and Sections 5, 6, 13(a) and 13(d), the term “Restricted Stock” shall be deemed to include the number of shares of Restricted Stock which would be issuable to a holder of Preferred Stock upon conversion of all shares of

Preferred Stock held by such holder at such time; provided, however, that the only securities which the Company shall be required to register pursuant hereto shall be shares of Common Stock; provided, further, however, that, in any underwritten public offering contemplated by this Section 4 or Sections 5 and 6, the holders of Preferred Stock shall be entitled to sell such Preferred Stock to the underwriters for conversion and sale of the shares of Common Stock issued upon conversion thereof and holders of a majority of the Preferred Stock being so registered shall have the right to approve the managing underwriter(s) selected by the Company in connection with such underwritten public offering.  Notwithstanding anything to the contrary contained herein, the Company shall not be obligated to effect a registration (i) during the 180 day period commencing with the effective date of a registration statement filed by the Company covering the first firm commitment underwritten public offering after the date hereof or (ii) if the Company delivers notice to the holders of the Restricted Stock within thirty (30) days of any registration request of the Company’s intent to file a registration statement for an underwritten public offering within ninety (90) days.

(b)Following receipt of any notice under this Section 4, the Company shall immediately notify all holders of Restricted Stock and Preferred Stock from whom notice has not been received and such holders shall then be entitled within 30 days thereafter to request the Company to include in the requested registration all or any portion of their shares of Restricted Stock.  The Company shall use its best efforts to register under the Securities Act, for public sale in accordance with the method of disposition described in paragraph (a) above, the number of shares of Restricted Stock specified in such notice (and in all notices received by the Company from other holders within 30 days after the giving of such notice by the Company).  The Company shall be obligated to register Restricted Stock pursuant to this Section 4 on three occasions only; provided, however, that such obligation shall be deemed satisfied only when a registration statement covering all shares of Restricted Stock specified in notices received as aforesaid for sale in accordance with the method of disposition specified by the requesting holders shall have become effective and, if such method of disposition is a firm commitment underwritten public offering, all such shares shall have been sold pursuant thereto.

(c)The Company (or at the option of the Company, the holders of Common Stock) shall be entitled to include in any registration statement referred to in this Section 4, for sale in accordance with the method of disposition specified by the requesting holders, shares of Common Stock to be sold by the Company or such other holders for its own account, except as and to the extent that, in the opinion of the managing underwriter (if such method of disposition shall be an underwritten public offering), such inclusion would adversely affect the marketing of the Restricted Stock to be sold.  Subject to Section 4(a) and except for registration statements on Form S-4, S-8 or any successor thereto, the Company will not file with the Commission any other registration statement with respect to its Common Stock, whether for its own account or that of other stockholders, from the date of receipt of a notice from requesting holders pursuant to this Section 4 until the completion of the period of distribution of the registration contemplated thereby.

(d)If, in the opinion of the managing underwriter, the inclusion of all of the Restricted Stock requested to be registered under this Section would adversely affect the

marketing of such shares, the Company shall only include the number of shares that, in the reasonable opinion of such underwriter, can be sold without having an adverse effect on the marketing of such shares, to be allocated to each stockholder of the Company on a pro rata basis based on the total number of shares held by such holder and requested to be included in the registration; provided, however, that the number of shares of Restricted Stock to be included in such underwriting and registration shall not be reduced unless all other securities of the Company are first excluded from the underwriting and registration.

5.Incidental Registration.  Subject to Section 13(f) of this Agreement, if the Company at any time (other than pursuant to Section 4 or Section 6) proposes to register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Restricted Stock for sale to the public), each such time it will give written notice to all holders of outstanding Restricted Stock of its intention so to do.  Upon the written request of any such holder, received by the Company within 30 days after the giving of any such notice by the Company, to register any of its Restricted Stock, the Company will use its best efforts to cause the Restricted Stock as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by the holder (in accordance with its written request) of such Restricted Stock so registered.  In the event that any registration pursuant to this Section 5 shall be, in whole or in part, an underwritten public offering of Common Stock, if the managing underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to the holders of Restricted Stock invoking the rights under this Section 5 on a pro rata basis based on the total number of shares of Restricted Stock held by such holders; and third, to any stockholder of the Company (other than such holders) on a pro rata basis.  No such reduction shall reduce the amount of securities of the selling holders included in the registration below thirty percent (30%) of the total amount of securities included in such registration.  In no event will shares of any other selling stockholder be included in such registration that would reduce the number of shares which may be included by holders of Restricted Stock without the written consent of the holders of not less than sixty-six and two-thirds percent (66 2/3%) of the Restricted Stock proposed to be sold in the offering.  If any such holder disapproves of the terms of any such underwriting, such holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement.  Any shares of Restricted Stock excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.  For any holder which is a partnership or corporation, the partners, retired partners and stockholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing person shall be deemed to be a single holder, and any pro rata reduction with respect to such holder shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such holder, as defined in this sentence.  Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 5 without thereby incurring any liability to the holders of

Restricted Stock.

6.Registration on Form S-3.  Subject to Section 13(f) of this Agreement, if at any time (i) a holder or holders of Restricted Stock then outstanding request that the Company file a registration statement on Form S-3 or any successor thereto for a public offering of all or any portion of the shares of Restricted Stock held by such requesting holder or holders, and (ii) the Company is a registrant entitled to use Form S-3 or any successor thereto to register such shares, then the Company shall use its best efforts to register under the Securities Act on Form S-3 or any successor thereto for public sale in accordance with the method of disposition specified in such notice, the number of shares of Restricted Stock specified in such notice.  Whenever the Company is required by this Section 6 to use its best efforts to effect the registration of Restricted Stock, each of the procedures and requirements of Section 4 (including but not limited to the requirement that the Company notify all holders of Restricted Stock from whom notice has not been received and provide them with the opportunity to participate in the offering) shall apply to such registration; provided, however, that there shall be no limitation on the number of registrations on Form S-3 which may be requested and obtained under this Section 6 and registrations effected pursuant to this Section 6 shall not be counted as demands for registration or registrations effected pursuant to Sections 4 or 5, respectively.

(b)Notwithstanding anything to the contrary set forth in this Agreement, the Company’s obligation under this Agreement to register Restricted Stock under the Securities Act on registration statements (“Registration Statements”) may, upon the reasonable determination of the Board of Directors made not more than twice in the aggregate (and not more than once with respect to a Registration Statement on Form S-1 and not more than once with respect to a Registration Statement on Form S-3 and including any delay pursuant to the last sentence of Section 4(a)) during any 12-month period, be suspended in the event and during such period as unforeseen circumstances (including without limitation (i) an underwritten primary offering by the Company (which includes no secondary offering) if the Company is advised in writing by its underwriters that the registration of the Restricted Stock would have a material adverse effect on the Company’s offering, or (ii) pending negotiations relating to, or consummation of, a transaction or the occurrence of an event which would require additional disclosure of material information by the Company in Registration Statements or such other filings, as to which the Company has a bona fide business purpose for preserving confidentiality or which renders the Company unable to comply with the Commission’s requirements) exist (such unforeseen circumstances being hereinafter referred to as a “Suspension Event”) which would make it impractical or unadvisable for the Company to file the Registration Statements or such other filings or to cause such to become effective.  Such suspension shall continue only for so long as such event is continuing but in no event for a period longer than (i) one hundred and twenty (120) days, in the case of a Registration Statement on Form S-1 (or any successor thereto) or (ii) ninety (90) days, in the case of a Registration Statement on Form S-3 (or any successor thereto).  The Company shall notify the Purchasers of the existence and nature of any Suspension Event.

7.Registration Procedures.  If and whenever the Company is required by the

provisions of Sections 4, 5 or 6 to use its best efforts to effect the registration of any shares of Restricted Stock under the Securities Act, the Company will, as expeditiously as possible:

(a)prepare and file with the Commission a registration statement (which, in the case of an underwritten public offering pursuant to Section 4, shall be on Form S-1 or other form of general applicability satisfactory to the managing underwriter selected as therein provided) with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby (determined as hereinafter provided);

(b)prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified in paragraph (a) above and comply with the provisions of the Securities Act with respect to the disposition of all Restricted Stock covered by such registration statement in accordance with the sellers’ intended method of disposition set forth in such registration statement for such period;

(c)furnish to each seller of Restricted Stock and to each underwriter such number of copies of the registration statement and each such amendment and supplement thereto (in each case including all exhibits) and the prospectus included therein (including each preliminary prospectus) as such persons reasonably may request in order to facilitate the public sale or other disposition of the Restricted Stock covered by such registration statement;

(d)use its best efforts to register or qualify the Restricted Stock covered by such registration statement under the securities or “blue sky” laws of such jurisdictions as the sellers of Restricted Stock or, in the case of an underwritten public offering, the managing underwriter reasonably shall request; provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;

(e)use its best efforts to list the Restricted Stock covered by such registration statement with any securities exchange on which the Common Stock of the Company is then listed;

(f)immediately notify each seller of Restricted Stock and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare and furnish to such seller a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Restricted Stock, such

prospectus shall not include 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 not misleading in light of the circumstances then existing;

(g)if the offering is underwritten and at the request of any seller of Restricted Stock, use its best efforts to furnish on the date that Restricted Stock is delivered to the underwriters for sale pursuant to such registration:  (i) an opinion dated such date of counsel representing the Company for the purposes of such registration, addressed to the underwriters and to such seller, to such effect as reasonably may be requested by counsel for the underwriters, and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters and to such seller, stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act, and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to such registration as such underwriters reasonably may request;

(h)make available for inspection by each seller of Restricted Stock, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, reasonable access to all financial and other records, pertinent corporate documents and properties of the Company, as such parties may reasonably request, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;

(i)cooperate with the selling holders of Restricted Stock and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Restricted Stock to be sold, such certificates to be in such denominations and registered in such names as such holders or the managing underwriters may request at least two business days prior to any sale of Restricted Stock; and

(j)permit any holder of Restricted Stock which holder, in the sole and exclusive judgment, exercised in good faith, of such holder, might be deemed to be a controlling person of the Company, to participate in good faith in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included and to permit any other holder of Restricted Stock participating in the registration to review such registration or comparable statement during its preparation.

For purposes of Section 7(a) and 7(b) and of Section 4(c), the period of distribution of Restricted Stock in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Restricted Stock in any other registration shall be deemed to extend until the earlier of the sale of all Restricted Stock covered thereby

and 180 days after the effective date thereof.

In connection with each registration hereunder, the sellers of Restricted Stock will furnish to the Company in writing such information requested by the Company with respect to themselves and the proposed distribution by them as reasonably shall be necessary in order to assure compliance with federal and applicable state securities laws and to make the registration statement correct, accurate and complete in all respects with respect to such sellers; provided, however, that this requirement shall not be deemed to limit any disclosure obligation arising out of any seller’s relationship to the Company if one of such seller’s agents or affiliates is an officer, director or control person of the Company.  In addition, the sellers shall, if requested by the Company, execute such other agreements, which are reasonably satisfactory to them and which shall contain such provisions as may be customary and reasonable in order to accomplish the registration of the Restricted Stock.

In connection with each registration pursuant to Sections 4, 5 or 6 covering an underwritten public offering, the Company and each seller agree to enter into a written agreement with the managing underwriter selected in the manner herein provided in such form and containing such provisions as are customary in the securities business for such an arrangement between such underwriter and companies of the Company’s size and investment stature.

8.Expenses.  All expenses incurred by the Company in complying with Sections 4, 5 and 6, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees and expenses of one counsel for the selling holders of Restricted Stock in connection with the registration of Restricted Stock, fees of the National Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of any insurance which might be obtained, but excluding any Selling Expenses, are called “Registration Expenses.”  All underwriting discounts and selling commissions applicable to the sale of Restricted Stock and the fees and expenses of more than one counsel for the selling holders of Restricted Stock in connection with the registration of Restricted Stock are called “Selling Expenses.”

The Company will pay all Registration Expenses incurred in connection with each of the first five Registration Statements filed pursuant to Sections 4, 5 or 6.  All Selling Expenses incurred in connection with each of the first five Registration Statements filed pursuant to Sections 4, 5 or 6, and all Selling Expenses and Registration Expenses incurred in connection with each Registration Statement filed pursuant to Sections 4, 5 or 6 thereafter, shall be borne by the participating sellers in proportion to the number of shares sold by each, or by such participating sellers other than the Company (except to the extent the Company shall be a seller) as they may agree.

9.Indemnification.

(a)To the extent permitted by law, in the event of a registration of any of

the Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, the Company will indemnify and hold harmless each holder of Restricted Stock, its partners, members, officers and directors, each underwriter of such Restricted Stock thereunder and each other person, if any, who controls such seller or underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such holder, officer, director, underwriter or controlling person may become subject under the Securities Act, Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus (but only to the extent not corrected in the final prospectus) or final prospectus contained therein, or any amendment or supplement thereof, (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Restricted Stock under the securities laws thereof (any such application, document or information herein called a “Blue Sky Application”), (iii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (iv) any violation by the Company or its agents of any rule or regulation promulgated under the Securities Act or Exchange Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration, or (v) any failure to register or qualify the Restricted Stock in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company (the undertaking of any underwriter chosen by the Company being attributed to the Company) will undertake such registration or qualification on the seller’s behalf (provided that in such instance the Company shall not be so liable if it has undertaken its best efforts to so register or qualify the Restricted Stock) and will reimburse each such holder, and such partner, member, officer and director, each such underwriter and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by any such seller, any such underwriter or any such controlling person in writing specifically for use in such registration statement, prospectus or Blue Sky Application.

(b)To the extent permitted by law, in the event of a registration of any of the Restricted Stock under the Securities Act pursuant to Sections 4, 5 or 6, each seller of such Restricted Stock thereunder, severally and not jointly, will indemnify and hold harmless the Company, each person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each other holder of Restricted Stock, each underwriter and each person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, other seller, underwriter or controlling person may become subject under the Securities Act, Exchange Act or otherwise, insofar as such losses, claims, damages or

liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Restricted Stock was registered under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary prospectus (but only to the extent not corrected in the final prospectus) or final prospectus contained therein, or any amendment or supplement thereof, or any Blue Sky Application or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, other seller, underwriter and controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by such seller specifically for use in such registration statement, prospectus or Blue Sky Application; and provided, further, however, that the liability of each seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the shares sold by such seller under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the net proceeds received by such seller from the sale of Restricted Stock covered by such registration statement.

(c)Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 9 and shall only relieve it from any liability which it may have to such indemnified party under this Section 9 if and to the extent the indemnifying party is prejudiced by such omission.  In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 9 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected; provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select a separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. No indemnifying party, in the defense of any such claim or litigation shall, except with the consent of each indemnified party, consent to entry of any judgment or enter

into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation, and no indemnified party shall consent to entry of any judgment or settle such claim or litigation without the prior written consent of the indemnifying party, which consent shall not be unreasonably withheld.

(d)If the indemnification provided for in this Section 9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the violation that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that in no event shall any contribution by a holder of Restricted Stock hereunder, when combined with amounts paid or payable pursuant to Section 9(b), exceed the net proceeds from the offering received by such holder.

(e)The obligations of the Company and holders of Restricted Stock under this Section 9 shall survive completion of any offering of Restricted Stock by a registration statement and the termination of this Agreement.

10.Changes in Common Stock or Preferred Stock.  If, and as often as, there is any change in the Common Stock or Preferred Stock by way of a stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof so that the rights and privileges granted hereby shall continue with respect to the Common Stock or Preferred Stock as so changed.

11.Rule 144 Reporting.  With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Stock to the public without registration, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, the Company agrees to:

(a)make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;

(b)use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the

Exchange Act; and

(c)furnish to each holder of Restricted Stock forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of such Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as such holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such holder to sell any Restricted Stock without registration.

12.Representations and Warranties of the Company.  The Company represents and warrants to you as follows:

(a)The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the articles of organization or By-laws of the Company or any provision of any indenture, agreement or other instrument to which it or any or its properties or assets is bound, conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company.

(b)This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms.

13.Miscellaneous.

(a)All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto (including without limitation transferees of any Preferred Stock or Restricted Stock), whether so expressed or not; provided, however, that registration rights conferred herein on the holders of Preferred Stock or Restricted Stock shall only inure to the benefit of a transferee of Preferred Stock or Restricted Stock if (i) there is transferred to such transferee at least twenty five percent (25%) of the shares of Restricted Stock (appropriately adjusted for any subdivision or combination) originally issued to a Purchaser, (ii) such transferee is a member, former member, partner, retired partner, family member or trust for the benefit of any individual holder, stockholder or affiliate of a party hereto or (iii) such transferee acquires at least 2,500,000 shares (appropriately adjusted for any subdivision or combination) of Preferred Stock on an as converted to shares of Common Stock basis; provided, further, however, that the Company is given written notice thereof.

(b)All notices, requests, consents and other communications hereunder shall be in writing and shall be mailed by certified or registered mail, return receipt requested, postage prepaid, or by recognized overnight delivery service of international

reputation or, in the case of non-U.S. residents, telexed or sent by recognized overnight delivery service of international reputation or, addressed as follows:

If to the Company, to:

Cogent Communications Group, Inc.

1015 31st Street, N.W.

Washington, DC 20007,

Attention:  Robert Beury

with copies to:

Latham & Watkins, LLP

555 Eleventh St., N.W., Suite 1000

Washington, D.C. 20004

Attention: David McPherson

If to any other party hereto, to their respective addresses set forth on Schedule I hereto;

If to any subsequent holder of Preferred Stock or Restricted Stock, to it at such address as may have been furnished to the Company in writing by such holder;

or, in any case, at such other address or addresses as shall have been furnished in writing to the Company (in the case of a holder of Preferred Stock or Restricted Stock) or to the holders of Preferred Stock or Restricted Stock (in the case of the Company) in accordance with the provisions of this paragraph.

(c)This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of New York, without reference to its conflict of laws provisions.

(d)This Agreement may (1) not be amended or modified, (2) no provision hereof may be waived, and (3) no party may join through the execution of an Instrument of Accession without the written consent of the Company and the holders of at least two-thirds of the outstanding shares of Restricted Stock.  Notwithstanding the foregoing, no such amendment or modification shall be effective if and to the extent that such amendment or modification either (a) creates any additional affirmative obligations to be complied with by any or all of the Purchasers or (b) grants to any one or more Purchasers any rights more favorable than any rights granted to all other Purchasers or otherwise treats any one or more Purchasers differently than all other Purchasers.

(e)This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(f)If requested in writing by the underwriters for the first underwritten public offering of securities of the Company after the date hereof, each holder of Restricted Stock who is a party to this Agreement shall agree not to sell publicly any shares of Restricted Stock or any other shares of Common Stock (other than shares of Restricted Stock or other shares of Common Stock being registered in such offering or any shares purchased in the open market after the Company’s public offering), without the consent of such underwriters, for a period of not more than 180 days following the consummation of such public offering; provided, however, that all holders of at least one percent (1%) of the then outstanding Common Stock and all officers and directors of the Company shall also have agreed not to sell publicly their Common Stock under the circumstances and pursuant to the terms set forth in this Section 13(f).

(g)If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.

(h)This Agreement shall amend and restate in its entirety the Sixth Amended and Restated Registration Rights Agreement, dated September 15, 2004, by and among the Company and the other parties thereto (the “Prior Registration Rights Agreement”), the parties hereto constitute the Company and the holders of at least two-thirds of the outstanding shares of Restricted Stock (as defined in the Prior Registration Rights Agreement) immediately prior to the execution of this Agreement.

(i)After the date of this Agreement, the Company shall not, without the prior written consent of the holders of at least two-thirds of the Restricted Stock then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant such holder registration rights pari passu or senior to those granted to the holders hereunder, other than a registration related to stock issued upon conversion of debt securities assumed by the Company in connection with its acquisition of Allied Riser Communications Corporation.

(j)All registration rights granted under Sections 4, 5, and 6 shall terminate and be of no further force and effect upon the earlier of (i) three (3) years after the date the Company first effects a registration pursuant to Section 4 or (ii) five (5) years from the date hereof.  In addition, the registration rights of a holder of Restricted Stock shall expire if all Restricted Stock held by and issuable to such holder (and its affiliates) may be sold under Rule 144 during any ninety (90) day period.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Please indicate your acceptance of the foregoing by signing and returning the enclosed counterpart of this letter, whereupon this Agreement shall be a binding agreement between the Company and you.

Please indicate your acceptance of the foregoing by signing and returning the enclosed counterpart of this letter, whereupon this Agreement shall be a binding agreement between the Company and you.

Very truly yours,
	COGENT COMMUNICATIONS GROUP, INC.
	By:
		By: David Schaeffer
		Title: Chairman and Chief Executive Officer

OAK INVESTMENT PARTNERS IX,

LIMITED PARTNERSHIP

By:        Oak Associates IX, LLC,its General Partner

By:

Name: Edward Glassmeyer

Title: Managing Member

OAK IX AFFILIATES FUND, LIMITED PARTNERSHIP

By:        Oak IX Affiliates, LLC, its General Partner

By:

Name: Edward Glassmeyer

Title: Managing Member

OAK IX AFFILIATES FUND-A, LIMITED PARTNERSHIP

By:        Oak Associates IX, LLC, its General Partner

By:

Name: Edward Glassmeyer

Title: Managing Member

JERUSALEM VENTURE PARTNERS III, L.P.
By:	Jerusalem Partners III, L.P., its General Partner
By:	Jerusalem Venture Partners Corporation, its
	General Partner
By:
Name: Erel Margalit
JERUSALEM VENTURE PARTNERS III
(ISRAEL), L.P.
By:	Jerusalem Venture Partners III (Israel) Management
	Company Ltd., its General Partner
By:
Name: Erel Margalit
JERUSALEM VENTURE PARTNERS
ENTREPRENEURS FUND III, L.P.
By:	Jerusalem Partners III, L.P., its General Partner
By:	Jerusalem Venture Partners Corporation, its
	General Partner
By:
Name: Erel Margalit

JERUSALEM VENTURE PARTNERS IV, L.P.
By:	Jerusalem Partners IV, L.P., its General Partner
By:	JVP Corp IV, its General Partner
By:
Name: Erel Margalit
JERUSALEM VENTURE PARTNERS IV (Israel), L.P.
By:	Jerusalem Partners IV - Venture Capital, L.P.,
	its General Partner
By:	JVP Corp IV, its General Partner
By:
Name: Erel Margalit
JERUSALEM VENTURE PARTNERS IV-A, L.P.
By:	Jerusalem Venture Partners IV, L.P., its General
	Partner
By:	JVP Corp IV, its General Partner
By:
Name: Erel Margalit

WORLDVIEW TECHNOLOGY
PARTNERS III, L.P.
WORLDVIEW TECHNOLOGY
INTERNATIONAL III, L.P.
WORLDVIEW STRATEGIC PARTNERS III, L.P.
WORLDVIEW III CARRIER FUND, L.P.
By:		Worldview Capital III, L.P., its General Partner
By:
Name:
WORLDVIEW TECHNOLOGY
PARTNERS IV, L.P.
WORLDVIEW TECHNOLOGY
INTERNATIONAL IV, L.P.
WORLDVIEW STRATEGIC PARTNERS IV, L.P.
By:	Worldview Capital IV, L.P., its General Partner
By:
Name:

BCP CAPITAL, L.P.
By:	BCP General LLC, its General Partner
By:
Name:	Steven D. Brooks
Title:	Managing Director
BCP CAPITAL QPF, L.P.
By:	BCP General LLC, its General Partner
By:
Name:	Steven D. Brooks
Title:	Managing Director
BCP AFFILIATES FUND LLC
By:	BCP Capital Management LLC, its Manager
By:
Name:	Steven D. Brooks
Title:	Managing Director

BOULDER VENTURES IV, L.P.

By:

Name:  Andrew E. Jones

Title:  General Partner

BOULDER VENTURES IV (ANNEX), L.P.

By:

Name:  Andrew E. Jones

Title:  General Partner

NAS PARTNERS I L.L.C.
By:	Nassau Capital LLC,
	its General Partner
By:
Name:  Randall A. Hack
Title:  Managing Member
NASSAU CAPITAL PARTNERS IV L.P.
By:	Nassau Capital LLC,
	its General Partner
By:
Name:  Randall A. Hack
Title:  Managing Member

BNP EUROPE TELECOM & MEDIA FUND II, LP

By:

Name: Shawna Morehouse & Martin Laidlaw

Title: Authorized Signatories

By: General Business, Finance and Investment Ltd., its General
Partner and By: Commerce Advisory Services Ltd, as Director and
Partnership Secretary

NATIO VIE DEVELOPPEMENT 3, FCPR

By:

Name: Bernard d’Hotelans

Title: Directeur Associe

By:

David Schaeffer

THE SCHAEFFER DESCENDENTS TRUST

By:

Ruth Schaeffer

UFO COMMUNICATIONS, INC.

By:

Name: Jay Ferguson

Title: Chairman

PALADIN CAPITAL PARTNERS FUND, L.P.
By:		Paladin General Holdings, LLC
		Its General Partner
By:
Name: Frank J. Hanna, Jr.
Title: President
WORLDWIDE INVESTMENTS, LLC
By: Worldwide Assets, Inc., its Sole Member
By:
Name:	Frank J. Hannah, Jr.
Title:
2001 PENN. AVE. INVESTMENTS, LLC
By:
Name: Michael R. Steed
Title: President

KLINE HAWKES PACIFIC, L.P.

By: Kline Hawkes Pacific Advisors, LLC,

             its General Partner

By:

Name: Jay Ferguson

Title: Member

KLINE HAWKES PACIFIC FRIENDS FUND, LLC

By: Kline Hawkes Pacific Advisors, LLC,

  its Managing Member

By:

Name: Jay Ferguson

Title: Member

BROADMARK CAPITAL, L.L.C.

By:

Name: Joseph L. Schocken

Title: President

GLOBAL ACCESS TELECOMMUNICATIONS, INC.

By:

Name: John E. Jones

Title: Vice President

COLUMBIA VENTURES CORPORATION

By:

Name: Kenneth D. Peterson, Jr.

Title: Chief Executive Officer

CISCO SYSTEMS CAPITAL CORPORATION

By:

Name:

Title:

Schedule I

[TO BE UPDATED]

Cisco Systems Capital Corporation
David Schaeffer
Ruth E. Schaeffer, Trustee of the Schaeffer Descendents Trust
Denise Shen
Barry Morris
Scott Welker
Edward Lu
Bradley Griggs
Scott Stewart
Thaddeus Weed
C Blair Partners, LP C.
Blair Partners II, LP
C. Blair Fund, Ltd.
BNP Europe Telecom & Media Fund II, LP	c/o CIBC Financial Center 11 Dr. Roy’s Drive, 3rd Floor P.O. Box 694 GT Grand Cayman Cayman Islands, B.W.I.
Natio vie Developpement 3, FCPR	BNP Private Equity 32, boulevard Haussman 75009 Paris France
Jerusalem Venture Partners III (Israel), L.P. Jerusalem Venture Partners IV (Israel), L.P.	Jerusalem Technology Park Building One Mahla, Jerusalem 91847 Attn: Erel Margalit
Jerusalem Venture Partners III, L.P. Jerusalem Venture Partners Entrepreneurs Fund III, L.P. Jerusalem Venture Partners IV, L.P. Jerusalem Venture Partners IV-A, L.P. Jerusalem Venture Partners Entrepreneurs Fund IV, L.P.	666 Fifth Avenue Suite 195 New York, NY 10103
Oak Investment Partners IX, LP Oak IX Affiliates Fund, LP Oak IX Affiliates Fund-A, LP	One Gorham Island Westport, CT 06880 Attn: Ed Glassmeyer
Worldview Technology Partners III, LP Worldview Technology International III, LP Worldview Strategic Partners III, LP Worldview III Carrier Fund, LP	435 Tasso Street #120 Palo Alto, CA 94301

Boulder Ventures IV, LP Boulder Ventures IV (Annex), LP	4750 Owings Mills Blvd. Owings Mills, MD 21117 Attn: Andy Jones
Nassau Capital Partners IV, LP NAS Partners I, LLC	Capstone Capitl L.L.C. 4700 Province Line Road Princeton, NJ 08540 Attn: Randall A. Hack
BCP Capital, L.P. BCP Capital QPF, L.P. BCP Affiliates Fund Llc	BCP Capital Management LLC One Maritime Plaza, Suite 2525 San Francisco, CA 94111 Attn: David Kapnick
Paladin Capital Partners Fund, L.P.	2001 Pennsylvania Avenue NW Suite 400 Washington, D.C. 20006
Worldwide Investments, LLC	Worldwide Investments, LLC c/o Worldwide Assets, Inc. P.O. Box 27740 Las Vegas, NV 89126
2001 Penn. Ave. Investments, LLC	2001 Pennsylvania Avenue, Suite 400 Washington, DC 20006
Kline Hawkes Pacific, L.P.	11726 San Vicente Blvd., Suite 300  Los Angeles, CA 90049
Kline Hawkes Pacific Friends Fund, LLC	11726 San Vicente Blvd., Suite 300 Los Angeles, CA 90049
Broadmark Capital	2800 One Union Square 600 University Street Seattle, WA 98101
UFO Communications, Inc.	60 Federal St, Suite 304San Francisco, CA 94107
Columbia Venture Corporation
Comdisco, Inc.
ACON Venture Partners, LP
Clipperbay & Co.
Covestco-Venture, LLC
2M Technology Ventures, L.P.

Schedule II

COGENT COMMUNICATIONS GROUP, INC.

INSTRUMENT OF ACCESSION

The undersigned,                                                     , as a condition precedent to becoming the owner or holder of record of                                                        (               ) shares of the                         Stock, par value $.001 per share, of Cogent Communications Group, Inc., a Delaware corporation (the “Company”), hereby agrees to become a Purchaser party to and bound by that certain Seventh Amended and Restated Registration Rights Agreement dated as of October              , 2004 by and among the Company and other stockholders of the Company.  This Instrument of Accession shall take effect and shall become an integral part of the said Seventh Amended and Restated Registration Rights Agreement immediately upon execution and delivery to the Company of this Instrument.

IN WITNESS WHEREOF, this INSTRUMENT OF ACCESSION has been duly executed by or on behalf of the undersigned, as a sealed instrument under the laws of the State of Delaware, as of the date below written.

Signature:

(Print Name)

Address:

Date:

Accepted:

COGENT COMMUNICATIONS GROUP,
INC.

By:

   Name:

   Title:

EX-10.27

Exhibit 10.27

[Cogent Logo]

6715 Kenilworth Avenue Partnership

1015 31^st St, NW

Washington, DC  20007

Re:Extension of Lease Agreement dated Sept 1, 2000 and Amendments dated through August 5, 2003.
Premises: 1015 31^st Street, NW, Washington, DC  20007

February 3, 2005

Dear Mr Schaeffer,

In reference to the above subject Lease Agreement between Cogent Communications, Inc. (tenant) and 6715 Kenilworth Avenue Partnership (Landlord), the parties agree that Tenant may by written notice, at least 30 days prior to expiration of lease, extend the lease for one year, with a new expiration date of August 31, 2006.

All other conditions of the Lease, as amended, including rent, remain unchanged.

TENANT: Cogent Communications, Inc.

/s/ Thaddeus G. Weed

Thaddeus G. Weed

Title: Chief Financial Officer

LANDLORD: 6715 Kenilworth Avenue Partnership

/s/ David Schaeffer

David Schaeffer

Title: General Partner

EX-14.1

Exhibit 14.1

COGENT COMMUNICATIONS GROUP, INC.

Code of Ethics for Chief Executive Officer and Senior Financial Officers

The Audit Committee of Cogent Communications Group, Inc. (the “Company”) promulgates this Code of Ethics governing the professional conduct and responsibilities of the chief executive officer, the chief financial officer and the controller (the “Executives”) of the Company and its subsidiaries.

1)  Executives shall act with honesty and integrity and shall use due care and diligence in performing their responsibilities to the Company.

2)  Executives shall avoid situations that represent actual or apparent conflicts of interest with their responsibilities to the Company and shall promptly disclose to the general counsel or the chairman of the audit committee any transaction or personal or professional relationship that reasonably could be expected to give rise to such an actual or apparent conflict.

3)  Executives shall provide the board of directors, auditors, regulatory agencies and others, as necessary, with information that is accurate, complete, fair, relevant, timely and understandable, including information for inclusion in the Company’s public statements or in submissions to governmental agencies.

4)  Executives shall comply with applicable laws, rules and regulations and the rules of any applicable public or private regulatory and listing authorities.

5)  Executives shall respect and safeguard the confidentiality of information acquired in the course of their work except as authorized or legally obligated to disclose such information.  Confidential information acquired in the course of an Executive’s work shall not be used for personal advantage.

6)  Executives shall share knowledge and maintain skills important and relevant to the Company’s needs.

7)  Executives shall promote high integrity in the work environment.

8)  Executives shall maintain control over and use for the benefit of the Company all Company assets and resources entrusted to them.

..o0O0o..

EX-21

EXHIBIT 21

In Effect as of March 20, 2005

Subsidiaries of:

	Jurisdiction
COGENT COMMUNICATIONS GROUP, INC.	(Delaware corporation)
COGENT COMMUNICATIONS, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF CALIFORNIA, INC.	(Delaware corporation)
COGENT INTERNET, INC.	(Delaware corporation)
NETWORK EQUIPMENT SOLUTIONS, LLC	(Delaware LLC)
UFO GROUP, INC.	(Delaware corporation)
COGENT POTOMAC, INC.	(Delaware corporation)
SFX ACQUISITION, INC.	(Delaware corporation)
ALLIED RISER COMMUNICATIONS CORPORATION	(Delaware corporation)
ALLIED RISER OPERATIONS CORPORATION	(Delaware corporation)
COGENT CANADA HOLDINGS, INC.	(Nova Scotia corporation)
COGENT CANADA, INC.	(Canadian Federal corporation)
FIBER SERVICES OF CANADA, LTD.	(Nova Scotia corporation)
COGENT COMMUNICATIONS OF ARIZONA, INC.	(Delaware corporation)
ALLIED RISER OF CALIFORNIA, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF CONNECTICUT, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF D.C., INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF FLORIDA, INC.	(Delaware corporation)
ALLIED RISER OF GEORGIA, INC. OF GEORGIA, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF ILLINOIS, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF MARYLAND, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF MASSACHUSETTS, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF MICHIGAN, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF MISSOURI, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF NEW JERSEY, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF NEW YORK, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF OKLAHOMA, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF OHIO, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF PENNSYLVANIA, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF TEXAS, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF UTAH, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF VIRGINIA, INC.	(Virginia corporation)
COGENT COMMUNICATIONS OF WASHINGTON, INC.	(Delaware corporation)
COGENT COMMUNICATIONS OF WISCONSIN, INC.	(Delaware corporation)
SYMPOSIUM OMEGA, INC.	(Delaware corporation)
SYMPOSIUM GAMMA, INC.	(Delaware corporation)
COGENT EUROPE, SARL	(Luxembourg corporation)
COGENT COMMUNICATIONS FRANCE, SAS	(French corporation)
COGENT COMMUNICATIONS ESPANA S.A.	(Spanish corporation)
LAMBDANET SWITZERLAND GMBH	(Swiss corporation)
COGENT COMMUNICATIONS UK LTD.	(English corporation)
COGENT COMMUNICATIONS BELGIUM SPRL	(Belgian corporation)
COGENT COMMUNICATIONS NETHERLANDS B.V.	(Dutch corporation)
C.C.D. COGENT COMMUNICATIONS DEUTSCHLAND, GMBH	(German corporation)

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-108702) pertaining to the 2003 Incentive Award Plan of Cogent Communications Group, Inc. of our report dated March 30, 2005, with respect to the consolidated financial statements and schedules of Cogent Communications Group, Inc. and subsidiaries included in this Annual Report (Form 10-K) for the year ended December 31, 2004.

	/s/ Ernst & Young LLP
McLean, VA
March 30, 2005

EX-31.1

Exhibit 31.1

CERTIFICATIONS

Certification of Chief Executive Officer

I, David Schaeffer, certify that:

1.             I have reviewed this annual report on Form 10-K of Cogent Communications Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2005

/s/ David Schaeffer

Name: David Schaeffer

Title: Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

I, Thaddeus Weed, certify that:

1.             I have reviewed this annual report on Form 10-K of Cogent Communications Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 31, 2005

/s/ Thaddeus Weed

Name: Thaddeus Weed

Title: Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Cogent Communications Group, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)            the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2004 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)           the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 31, 2005

/s/ David Schaeffer

David Schaeffer
Chief Executive Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Cogent Communications Group, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i)            the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2004 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii)           the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 31, 2005

/s/ Thaddeus Weed

Thaddeus Weed
Chief Financial Officer

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.