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Settlement and Standstill Agreement
This SETTLEMENT AND STANDSTILL AGREEMENT, dated as of July 13, 2007 (the “Agreement”), is by and between Arbinet-thexchange, Inc., a Delaware corporation (“Arbinet”), and the individuals and entities listed on Schedule A hereto (collectively, the “Stockholders”).
WHEREAS, the Stockholders are the beneficial owners of shares of common stock, par value $0.001 per share, of Arbinet (the “Common Stock”); and
WHEREAS, by letter dated March 6, 2007, Robert A. Marmon (“Marmon”) provided notice to Arbinet of his intention to nominate Marmon, William L. Schrader, and James F. Lavin for election as directors of Arbinet at its 2007 annual meeting of stockholders (the “Stockholder Nomination”); and
WHEREAS, subject to this Agreement, Marmon intends hereby to withdraw the Stockholder Nomination and refrain from contesting the election of directors at Arbinet’s 2007 annual meeting of stockholders; and
WHEREAS, Arbinet and the Stockholders intend to provide hereby for, among other matters, enlargement of the Board of Directors of Arbinet (the “Board”) from six (6) to nine (9) members and for the appointment of Shawn O’Donnell, Jill Thoerle, and Stanley Kreitman to the Board to fill the vacancies resulting therefrom, and furthermore, Arbinet and the Stockholders desire to otherwise resolve all matters between them, including those matters at issue in or with respect to the Stockholder Nomination.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Representations .
(a) Binding Agreement: Authority . Arbinet hereby represents and warrants that this Agreement has been duly authorized, executed and delivered by Arbinet, and is a valid and binding obligation of Arbinet, enforceable against Arbinet in accordance with its terms. Each of the Stockholders represents and warrants that this Agreement has been duly authorized, executed and delivered by such Stockholder, and is a valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms.
(b) Share Ownership of Common Stock . Each of the Stockholders hereby represents and warrants that, as of the date hereof, it and its Affiliates and Associates (as such terms are hereinafter defined) are the “beneficial owners” (as such term is hereinafter defined) of the shares of Common Stock set forth opposite their respective name on Schedule A hereto (the “Shares”), and that neither it nor its Affiliates or Associates beneficially own, or have any rights, options or agreements to acquire or vote, any other shares of Common Stock.
(c) Defined Terms . For purposes of this Agreement, the term “Affiliate” and “Associate” shall have the respective meanings set forth in Rule 12b-2 promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For purposes of this Agreement, the terms “beneficial owner” and “beneficially own” shall have the same meanings as set forth in Rule 13d-3 promulgated by the SEC under the Exchange Act, except that a person shall also be deemed to be the beneficial owner of all shares of Common Stock that such person has the right to acquire pursuant to the exercise of any rights in connection with any securities or any agreement, regardless of when such rights may be exercised and whether they are conditional.
Section 2. Directors .
(a) Additional Directors . The Stockholders and Arbinet agree that as promptly as practicable (but in no event more than the second (2 nd ) business day) following the execution of this Agreement by the parties hereto, the Board will increase the size of the Board to nine (9) members and (i) appoint Shawn O’Donnell and Jill Thoerle to fill the newly created directorships on the Board as Class III directors whose term shall expire at Arbinet’s 2007 annual meeting of stockholders, and (ii) appoint Stanley Kreitman to fill the newly created directorship on the Board as a Class II director whose term shall expire at Arbinet’s 2009 annual meeting of stockholders. At such time as Shawn O’Donnell, Jill Thoerle, and Stanley Kreitman shall each become a director of Arbinet in accordance with the terms of this Agreement, Shawn O’Donnell, Jill Thoerle, and Stanley Kreitman shall agree in writing to be bound by the terms and conditions of Arbinet’s policies applicable to directors, including, without limitation, Arbinet’s Code of Business Conduct & Ethics, Corporate Governance Guidelines, and Insider Trading Policy.
(b) Nominations . Arbinet agrees to nominate Michael J. Ruane, Shawn O’Donnell, and Jill Thoerle for election as Class III directors of Arbinet at its 2007 annual meeting of stockholders, and use its reasonable best efforts to cause the election of such persons, each to serve for a three-year term ending upon the election of directors at Arbinet’s 2010 annual meeting of stockholders and until his or her successor is duly elected and qualified.
(c) Committees . Arbinet agrees to appoint (i) Shawn O’Donnell to the Compensation Committee of the Board, (ii) Jill Thoerle to the Audit Committee of the Board, and (iii) Stanley Kreitman to the Nominating and Corporate Governance Committee of the Board.
Section 3. Voting .
(a) 2007 Annual Meeting . The Stockholders, together with their Affiliates and Associates, will not submit any stockholder proposal (pursuant to Rule 14a-8 or otherwise), or any notice of nomination or other business under Arbinet’s Second Amended and Restated By-laws, and will not nominate or oppose directors for election at the 2007 annual meeting of stockholders of Arbinet. The Stockholders shall cause all Shares of Common Stock beneficially owned by them, and/or their Affiliates or Associates, as of the record date for the 2007 annual meeting of stockholders of Arbinet, to be present for quorum purposes and to be voted in favor of Michael J. Ruane, Shawn O’Donnell, and Jill Thoerle at such annual meeting or at any adjournments or postponements thereof.
(b) Other Meetings . During the Standstill Period (as such term is hereinafter defined), and for so long as the Stockholders has the ability to vote or direct the voting of the Shares, the Stockholders shall cause all Shares of Common Stock beneficially owned by them, and/or their Affiliates or Associates, as of the record date for any other meeting of stockholders of Arbinet at which directors are to be elected, to be present for quorum purposes and to be voted in favor of Arbinet’s nominees for directors at such meeting or any adjournments or postponements thereof.
(c) Further Assurances . The Stockholders further agree to take all action reasonably necessary to carry out the intention of this Section 3, including, without limitation, delivering to Arbinet upon its written request executed proxies naming the proxies appointed by Arbinet for all shares of Common Stock beneficially owned by the Stockholders and/or their Affiliates or Associates as of the record dates for the aforementioned meetings of stockholders.
Section 4. Acquisition of Stock . Each of the Stockholders covenants and agrees that, from and after the date on which Shawn O’Donnell, Jill Thoerle, and Stanley Kreitman are duly appointed to the Board, and until the expiration of the Standstill Period, neither it nor any of its Affiliates or Associates will, without the prior written consent of Arbinet specifically expressed in a vote adopted by the Board, directly or indirectly, purchase or cause to be purchased or otherwise acquire or agree to acquire, or become or agree to become the beneficial owner of, any other securities (other than the Shares) issued by Arbinet, or any securities convertible into or exchangeable for Common Sto