This excerpt taken from the CBEY 8-K filed Oct 23, 2009.
The Antani Action (as further defined in ¶1.2) was commenced when Cbeyond shareholder, Meghal Antani, filed a shareholder derivative complaint in the Superior Court of Fulton County, Georgia (the Court) on September 19, 2008. On October 14, 2008, another Cbeyond shareholder, John C. Scheldt, filed with the Court a similar shareholder derivative complaint, the Scheldt Action (as further defined in ¶1.19). On November 19, 2008, The Honorable Judge Melvin K. Westmoreland entered a Consent Order consolidating the Antani and
Scheldt Actions, appointing as Lead Counsel the law firm of Barroway Topaz Kessler Meltzer & Check, LLP (Barroway Topaz) and setting a schedule requiring Plaintiffs to file a consolidated complaint on or before December 19, 2008 and providing for Defendants responses thereto. The parties later agreed to allow Plaintiffs until January 30, 2009 to file a consolidated complaint and, in accordance therewith, on January 30, 2009, Plaintiffs filed their consolidated complaint (the Complaint) on behalf of Cbeyond.
The Complaint alleges, inter alia, that between approximately November 1, 2007 and February 2008, the Individual Defendants caused the Company to issue materially false or misleading statements and omissions concerning the Companys financial well-being and future prospects. Specifically, the Plaintiffs allege that the Individual Defendants failed to disclose and/or purposely misled investors regarding Cbeyonds customer attrition rate (the Churn Rate), which was allegedly much higher than disclosed by the Company through the Individual Defendants. The Complaint further alleges that certain of the defendants, based upon their knowledge of non-public information regarding the Companys Churn Rate, sold substantial portions of their personally-held or indirectly controlled Company stock and that certain of the defendants did so several days after entering into Indemnification Agreements with the Company dated November 5, 2007. The Complaint also alleges that the Individual Defendants violated the Companys Nominating and Corporate Governance Charter, which allegedly required that the Nominating and Corporate Governance Committee shall be composed of three or more directors and that, in accordance with the same charter, since its adoption on September 19, 2005, neither the Companys website nor any public filing made by the Company indicated that Cbeyond created or maintained any corporate governance guidelines as the Company had previously claimed. As a result of the foregoing, the Complaint asserts state law claims on the basis of these allegations, and seeks disgorgement, the imposition of a constructive trust and other monetary and non-monetary relief.
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In or around February 2009, counsel for Plaintiffs and nominal defendant Cbeyond began a dialogue regarding the possible resolution of the Action and, in connection therewith, the parties agreed to pursue mediation before the Honorable Nicholas H. Politan (Ret.) (Judge Politan). On March 27, 2009, certain parties, including counsel for the Plaintiffs, the Individual Defendants, and Cbeyond, conducted an all day mediation session before Judge Politan. The Plaintiffs, as part of the settlement dialogue, made a settlement demand to defendants which included, among other things, proposed corporate governance reforms. At the conclusion of the mediation, the parties were not able to resolve the Action. However, since the conclusion of the mediation session, counsel for the Plaintiffs, the Individual Defendants and the Company continued their arms-length negotiations with the substantial assistance and oversight of Judge Politan and, during such negotiations, the Company provided Plaintiffs with non-public information. Thereafter, the Settling Parties ultimately agreed to resolve the Action on the terms set forth herein.
This excerpt taken from the CBEY DEF 14A filed Apr 24, 2009.
The Cbeyond, Inc. 2005 Equity Incentive Award Plan (the Incentive Plan) was amended and restated to add additional performance goals set forth below and was approved by the Board of Directors on April 22, 2009. The Incentive Plan originally became effective on October 31, 2005.
We are seeking stockholder approval of the Incentive Plan, as amended and restated, to satisfy any requirements under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code) with respect to awards granted under the Incentive Plan. No additional shares are being requested to be reserved for issuance under the Incentive Plan, and the Incentive Plan has not been amended since its adoption in 2005, except to add additional performance goals set forth below.
Section 162(m) of the Code denies a tax deduction to public companies for compensation paid to certain covered employees in a taxable year to the extent the compensation paid to a covered employee exceeds $1,000,000, unless the plan contains certain features that qualify the compensation as performance-based compensation. One of the requirements of performance-based compensation for purposes of Section 162(m) is that the material terms of the plan under which awards are granted be approved by our public stockholders. Plans that were in existence prior to an initial public offering do not need to seek this stockholder approval until
the third annual meeting at which directors are elected following the calendar year in which the company conducts its initial public offering. The third meeting of our stockholders following our initial public offering took place on June 13, 2008. Therefore, in order for any new awards granted under the Incentive Plan to be eligible to qualify for full tax deductibility to the Company under Section 162(m), our stockholders must approve the terms of the Incentive Plan.
The material terms of the performance goals for awards that may be granted under the Incentive Plan are described below. This summary is qualified in its entirety by reference to the full text of the Incentive Plan, which is attached as Appendix A to this proxy statement.