Exhibit 10.44
SUBSCRIPTION AGREEMENT
among
NORTHEAST OPTIC NETWORK, INC.,
NEON COMMUNICATIONS, INC.
and
CONSOLIDATED EDISON COMMUNICATIONS, INC.
DATED AS OF NOVEMBER 23, 1999
TABLE OF CONTENTS
1. Definitions; Accounting Terms..........................................2
1.01. Definitions......................................................2
1.02. Accounting Terms.................................................6
2. Delivery of the CEC NEON Shares; Time and Place of Closing;
Consideration for CEC NEON Shares......................................6
2.01. Delivery of the CEC NEON Shares..................................6
2.02. Time and Place of Closing........................................7
2.03. Restrictions on CEC NEON Shares..................................7
2.04. Consideration for the CEC NEON Shares............................9
2.05. Certain Rights to Acquire Additional Shares......................9
3. Representations and Warranties of the NEON Entities...................10
3.01. Organization and Qualification..................................10
3.02. Authority Relative to This Agreement............................10
3.03. Consents and Approvals; No Violation............................10
3.04. NEON SEC Documents..............................................11
3.05. Legal Proceedings...............................................11
3.06. Capital Stock Documents.........................................11
3.07. Shareholders Agreement; Corporate Governance Documents..........11
3.08. Other Contracts.................................................12
3.09. CEC NEON Shares.................................................12
3.10. No Property or Business Activity other than for the
Reorganization..................................................12
4. Representations and Warranties of CEC.................................12
4.01. Organization and Qualification..................................12
4.02. Authority Relative to this Agreement............................13
i
4.03. Consents and Approvals..........................................13
4.04. Acquisition of Shares Solely for Investment.....................13
5. Covenants of the NEON Entities........................................14
5.01. Conduct of Business between the Date of the Agreement
and the Closing Date............................................14
5.02. Deliver CEC NEON Shares at Closing..............................14
5.03. Directors' and Officers' Insurance..............................14
5.04. Redemptions of NEON Common Stock................................14
5.05. Right of First Refusal..........................................14
5.06. [Intentionally Omitted].........................................15
5.07. Pre-Closing Disclosure of Material Events.......................16
5.08. Nasdaq Listing..................................................16
5.09. Tax Reporting...................................................16
5.10. Prohibited Actions Pending the Closing..........................16
5.11. Additional Actions Pending the Closing..........................17
5.12. Completion of the Reorganization................................17
5.13. Survival of Certain Covenants...................................17
6. Reimbursement of Reorganization Costs.................................17
7. Covenants of CEC and NEON.............................................18
7.01. Consents and Approvals..........................................18
7.02. Further Assurances..............................................18
7.03. Public Statements...............................................18
7.04. [Intentionally Omitted].........................................18
7.05. Agreement Regarding Private Letter Ruling.......................19
8. Conditions Precedent to Closing.......................................19
ii
8.01. Conditions Precedent to CEC Obligations......................19
8.02. Conditions Precedent to the NEON Entities' Obligations.......20
9. Indemnification and Third Party Claims................................22
9.01. Indemnification..............................................22
9.02. Third Party Claims Procedures................................23
9.03. Other Remedies...............................................24
9.04. Limitation of Liability......................................24
10. Alternative Transaction Structure.....................................24
10.01. Failure to Obtain Private Letter Ruling......................24
10.02. References to NEON Entities..................................26
11. Termination...........................................................26
11.01. Mutual Termination...........................................26
11.02. Termination Date.............................................26
12. Miscellaneous Provisions..............................................26
12.01. Expenses.....................................................26
12.02. Amendment and Modification; Extension; Waiver................27
12.03. Notices......................................................27
12.04. Assignment; No Third Party Beneficiaries.....................28
iii
12.05. Governing Law................................................28
12.06. Counterparts.................................................28
12.07. Interpretation...............................................28
12.08. Jurisdiction and Enforcement.................................29
12.09. Entire Agreement.............................................29
12.10. Severability.................................................30
12.11. Conflicts....................................................30
12.12. Guaranty of CEC's Obligations................................30
12.13. Force Majeure................................................31
iv
EXHIBITS
Exhibit 1.01(a) Form of System Agreement
Exhibit 1.01(b) Form of Registration Rights Agreement
Exhibit 8.01(d)(i) Form of NEON Opinion of Counsel
Exhibit 8.01(d)(iv) Form of Stockholders' Agreement
Exhibit 8.02(d)(i) Form of CEC Opinion of Counsel
Exhibit 10.01 Form of Escrow Agreement
Exhibit A Form of Agreement and Plan of Merger
v
PREAMBLE
SUBSCRIPTION AGREEMENT (including the Exhibits hereto, the "Agreement"),
dated as of November 23, 1999, between NEON COMMUNICATIONS, INC., a Delaware
corporation ("NEON"), NORTHEAST OPTIC NETWORK, INC., a Delaware corporation and
the sole stockholder of NEON ("Old NEON," and together with NEON, the "NEON
Entities") and CONSOLIDATED EDISON COMMUNICATIONS, INC., a New York corporation
and a wholly-owned subsidiary of Consolidated Edison, Inc. ("CEC").
WHEREAS the potential efficiencies and economies of scale, increased
aggregate market and expanded geographic coverage makes a business arrangement
integrating their separate systems attractive to the NEON Entities and CEC;
WHEREAS NEON desires to issue and CEC desires to acquire the CEC NEON
Shares (as defined below) on the terms and conditions set forth in this
Agreement;
WHEREAS, in connection with the transactions contemplated by this
Agreement, Old NEON has created NEON (a wholly-owned first-level subsidiary of
Old NEON) and NEON has created NEON Acquisition, Inc. ("NEON Acquisition"), a
Delaware corporation (a wholly-owned first-level subsidiary of NEON as well as a
wholly-owned second-level subsidiary of Old NEON);
WHEREAS, NEON was incorporated on November 22, 1999 and neither NEON nor
NEON Acquisition owns any assets (other than, in the case of NEON, its ownership
of NEON Acquisition) or has engaged in any business operations prior to the date
of this Agreement nor, prior to the Closing Date, will either engage in any
business operations other than as contemplated by this Agreement;
WHEREAS in connection with the transactions contemplated by this
Agreement, and for good business reasons, immediately prior to the consummation
of the transactions contemplated by this Agreement, NEON's wholly owned
subsidiary NEON Acquisition will have merged with and into NEON's sole
stockholder, Old NEON, pursuant to Section 251(g) of the Delaware General
Corporation Law, and the terms and conditions of an Agreement and Plan of Merger
by and among NEON, NEON Acquisition and Old NEON dated as of the Closing Date
(substantially in the form attached hereto as Exhibit A) with Old NEON being the
surviving entity and a wholly-owned subsidiary of NEON (the "Reorganization");
WHEREAS (i) CEC will make the CEC Cash Contributions (as defined below)
and NEON will issue the CEC NEON Shares (as defined below) (collectively, the
"CEC Contribution Transactions") and (ii) Exelon Corporation, a Pennsylvania
corporation ("Exelon") will make in-kind capital contributions and contributions
of cash or cash-equivalent property to NEON to defray capital expenses pursuant
to the terms of a System Agreement to be entered into among NEON, Old NEON and
Exelon, and NEON will issue to Exelon certain shares of NEON Common Stock
pursuant to a Subscription Agreement to be entered into among NEON, Old NEON and
Exelon (such transactions together with the CEC Contribution Transactions, the
"Contribution Transactions");
WHEREAS for federal income tax purposes it is intended that the
Reorganization and the Contribution Transactions (as defined below) qualify as
exchanges under Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS the NEON Entities and CEC desire to establish certain other rights
and duties with respect to one another on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements hereinafter set forth, and intending to be legally
bound hereby, the NEON Entities and CEC agree as follows:
1. Definitions; Accounting Terms.
1.01. Definitions. As used in this Agreement, the following terms have the
following meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended.
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Investment Bank" shall have the meaning set forth in Section
10.01(f).
2
"Business Day" means any day other than Saturday, Sunday and any day which
is a legal holiday or a day on which banking institutions in New York are
authorized or required by law or other action of a Governmental Authority to
close.
"CEC Cash Contributions" means the contributions of cash or
cash-equivalent property made by CEC to NEON to defray capital expenses as
required by the CEC System Agreement.
"CEC Contribution Transactions" means collectively the CEC Cash
Contributions, the CEC In-Kind Capital Contributions and the issuance by NEON of
the CEC NEON Shares.
"CEC NEON Shares" shall mean 2,448,240 shares of NEON Common Stock, which
is equal to 1.25 x 10.75% x number of shares outstanding on a fully-diluted
basis on the date of this Agreement (which does not include shares authorized
but unissued under NEON's option plans on such date). The percentage of shares
of NEON Common Stock and the absolute number of shares of NEON Common Stock to
which CEC shall be entitled shall not be affected by the public trading price
for NEON Common Stock.
"CEC Opinion of Counsel" means the opinion of the General Counsel of
Consolidated Edison, Inc., dated as of the Closing Date, substantially in the
form set forth in Exhibit 8.03(d).
"CEC Required Regulatory Approvals" means (1) receipt from the New York
State Public Service Commission (the "PSC") of a Certificate of Public
Convenience and Necessity authorizing CEC to operate a facilities-based
wholesale carrier; (2) final approval by the PSC of the petition under Sections
70 and 119a of the New York State Public Service Law related to the License and
Operating Agreement, made as of June 14, 1999 (the "L&O Agreement"), by and
between CEC and the Consolidated Edison Company of New York, Inc.; (3) final
approval by the PSC of the petition under Section 100 of the New York State
Public Service Law relating to the purchase of the CEC NEON Shares; (4) receipt
from the City of New York of a broadband telecom-munications franchise and
receipt by CEC and any of its affiliates of all final approvals required by the
City of New York to authorize the transactions contemplated by the Subscription
Agreement, the Related Agreements and the L&O Agreement; (5) the filing and
waiting period requirements relating to the HSR Act; and (6) receipt of final
consents of approvals from all other Governmental Authorities that are required
as a prerequisite to the consummation of transactions contemplated by this
Agreement, the Related Agreements and the L&O Agreement; provided, however, that
none of (1) through (5) above shall impose conditions or obligations on CEC
which make the transactions contemplated by this Agreement and the Related
Agreements commercially impracticable.
3
"CECD" means CEC Delaware, Inc., a Delaware corporation.
"Closing"-- See Section 2.02.
"Closing Date"-- See Section 2.02.
"Code"-- See Preamble.
"Confidentiality Agreements" means (i) that certain Nondisclosure
Agreement dated as of September 8, 1998 by and between Old NEON and Exelon, as
amended to date, (ii) that certain Confidentiality and Nondisclosure Agreement
dated as of January 12, 1999 by and between PECO Energy Company (doing business
as Exelon Communications), Consolidated Edison Company of New York, Inc. and
Consolidated Edison Communications, Inc. and (iii) that certain Letter Agreement
dated as of July 30, 1998 by and between Old NEON, Consolidated Edison Company
of New York, Inc. and Consolidated Edison Communications, Inc.
"Default Investment Bank" shall have the meaning set forth in Section
10.01(f).
4
"Escrow Agent" means State Street Bank & Trust Company.
"Escrow Agreement" means the Escrow Agreement to be entered into among
NEON, CECD and the Escrow Agent as of the Closing Date in the event that the
Reorganization is abandoned pursuant to Section 10 of this Agreement,
substantially in the form attached as Exhibit 10.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC thereunder.
"Exelon Capital Partners" means Exelon Capital Partners, Inc., a Delaware
corporation.
"Final Termination Date" shall have the meaning set forth in Section
11.02.
"Force Majeure" shall have the meaning set forth in Section 12.13.
"GAAP" - See Section 1.02.
"Governmental Authority" means any court, administrative or regulatory
agency or commission or other governmental entity or instrumentality, domestic,
foreign or supranational or any department thereof. In addition, for purposes of
this Agreement, the Nasdaq Stock Market shall be deemed a "Governmental
Authority."
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
"Indemnifiable Loss" - See Section 9.01(a).
"Indemnified Party" or "Indemnified Parties"-- See Section 9.01(a).
"Indemnifying Party" - See Section 9.01(a).
"NEON" -- See Preamble.
"NEON Common Stock" means the Common Stock, $.01 par value per share, of
NEON.
"NEON Entities" - NorthEast Optic Network, Inc. and NEON Communications,
Inc., together.
"Old NEON" - See Preamble.
"NEON Opinion of Counsel" shall mean the opinion of ▇▇▇▇ and ▇▇▇▇ LLP,
counsel to NEON, dated as of the Closing Date, substantially in the form set
forth in Exhibit 8.01(d)(i).
4
[Confidential materials omitted and filed separately with the Securities
Exchange Commission. Asterisks denote omissions.]
"NEON Required Regulatory Approvals" means the filing and waiting period
requirements relating to the HSR Act, the approval of an Additional Shares
Listing Application for the CEC NEON Shares to be filed with Nasdaq and the
declaration of effectiveness by the SEC of a Registration Statement on Form S-4
relating to the Reorganization; provided, however, that such SEC approval shall
not be applicable in the event that the transactions contemplated herein are
consummated in the manner set forth in Section 10 ("Alternative Transaction
Structure").
"NEON SEC Documents" means all reports, forms, statements and other
documents filed by Old NEON with the Securities and Exchange Commission since
July 1, 1998, and publicly available on or prior to the date of this Agreement.
"Parent" means Consolidated Edison, Inc.
"Person" means any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization, any other entity
or Governmental Authority.
"POP" or "Point of Presence" means the location where CEC shall provide
NEON approximately [ ** ] square feet of rentable built-out telecommunication
space wherein NEON shall place its inter-party telecommunications equipment and
ancillary equipment and wherein NEON may allow its customers to place
telecommunications equipment and ancillary equipment.
"Pre-closing Acquisition Transaction" shall have the meaning set forth in
Section 2.05(a).
5
"Principal Shareholders Agreement" means that certain FiveCom, Inc.
Principal Shareholders Agreement, dated as of May 28, 1998, by and among Old
NEON, Northeast Utilities and Central Maine Power Company.
"Private Letter Ruling" shall have the meaning set forth in Section 7.05.
"Registration Rights Agreement" means the Registration Rights Agreement to
be entered into among NEON, Exelon (or Exelon Capital Partners in the event that
the Reorganization is not consummated prior to Closing) and CEC (or CECD in the
event that the Reorganization is not consummated prior to Closing) as of the
Closing Date, substantially in the form attached as Exhibit 1.01(b).
"Reimbursable Expenses" has the meaning set forth in Section 6.01.
"Reimbursement Agreement" means that certain letter agreement, dated as of
September 30, 1999, relating to the reimbursement of the NEON Entities by Exelon
and CEC of certain costs in connection with the Reorganization.
7 "Related Agreements" means the System Agreement, the Reimbursement
Agreement, the Stockholders' Agreement, the Registration Rights Agreement and,
if the Reorganization is abandoned pursuant to Section 10 of this Agreement, the
Escrow Agreement.
"Reorganization"-- See Preamble.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder.
"Stockholders' Agreement" means that certain Stockholders' Agreement dated
as of the date hereof by and among NEON, Mode 1 Communications, Inc., Northeast
Utilities, Exelon (or Exelon Capital Partners in the event that the
Reorganization is not consummated prior to Closing) and CEC (or CECD in the
event that the Reorganization is not consummated prior to Closing) relating to,
among other things, the nomination and election of a CEC designee and an Exelon
designee to the Board of Directors of NEON, substantially in the form attached
as Exhibit 8.01(d)(iv).
"System Agreement" means the System Agreement to be entered into between
NEON and CEC as of the Closing Date, substantially in the form attached as
Exhibit 1.01(a).
1.02. Accounting Terms. The accounting terms used in this Agreement
and the Related Agreements shall, unless otherwise specifically provided, have
the meanings customarily given them in accordance with United States generally
accepted accounting principles ("GAAP") and all financial computations hereunder
or under this or those agreements shall, unless otherwise specifically provided,
be computed in accordance with GAAP consistently applied.
2. Delivery of the CEC NEON Shares; Time and Place of Closing;
Consideration for CEC NEON Shares
2.01. Delivery of the CEC NEON Shares. Upon the terms and subject to
the satisfaction of the conditions set forth in this Agreement, at the Closing
NEON will deliver the CEC NEON Shares to CEC, which CEC NEON Shares shall be
subject to certain restrictions in the manner set forth in Section 2.03 of this
Agreement in order to secure the obligations of CEC for property transfers and
covenants which are consideration therefor.
2.02. Time and Place of Closing. The Closing shall take place on
such date as the parties may agree, which date shall be as soon as practicable
and no later than three Business Days following the date on which all the
conditions set forth in Section 8 have been satisfied or waived, at the offices
of ▇▇▇▇ and ▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ or at such other
place or time as the parties may agree. The date and time at which the Closing
actually occurs is referred to as the "Closing Date".
2.03. Restrictions on CEC NEON Shares.
(a) Immediately upon the completion of each of the following
events (in no particular order, except as explicitly set forth below), CEC shall
cease to be "restricted" (as defined in (c) below) in its rights to the
ownership of the CEC NEON Shares in the percentages set forth below:
6
[Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.]
--------------------------------------------------------------------------------------------------------------------
Time of Removal of Restrictions of Shares: Percentage of Shares:
--------------------------------------------------------------------------------------------------------------------
1. At Closing [ ** ]%
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2. Upon the later of (i) the date on which CEC grants an IRU in the
NEON Fibers to NEON, pursuant to Section 1.1.1 of the System
Agreement, and (ii) the Acceptance Date, as defined in Section
1.3.3 of the System Agreement. [ ** ]%
--------------------------------------------------------------------------------------------------------------------
3. Upon the completed transfer to NEON of interconnection of the
Carrier POPs and/or LSOs with CEC's Network, pursuant to
Subsection 2.03(b) hereof and Article II of and Section 3.3.5 of
the System Agreement. [ ** ]%
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4. Annually on each of the first four anniversaries of the Closing,
provided that all CEC Cash Contributions have been made for the
immediately preceding 12-month period, to be distributed 25% per
year for so long as CEC remains in compliance with Section 3.3 [ ** ]% aggregate
of the System Agreement. ([ ** ]% per annum)
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5. Upon the completion of the events identified in items 2, 3 and 4
above by CEC. [ ** ]%
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Total: [ ** ]%
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(b) (1) Notwithstanding any provision to the contrary in this
Agreement or in the System Agreement, despite its reasonable best efforts CEC
has not completed the full performance requirement set forth in line item 3 of
the table in Section 2.03(a), but has (i) completed the interconnection
requirements for all Priority A sites in Appendix 7.18(ii) and (ii) at least
[** ]% of the aggregate interconnection requirements for the Priority A sites
and Priority B sites in Appendix 7.18(ii), then the proportion of shares (of
that full [ ** ]% of shares allocated to such performance in line item 3 of
the table in Section 2.03(a)) that corresponds to the proportion of such
performance CEC has completed shall cease to be restricted.
7
(2) Provided that CEC has complied with Subsection 2.03(b)(1) above,
then solely for purposes of line item 5 of the table in Section 2.03(a), CEC
shall be considered to have completed the transfers pursuant to line item 3 of
such table.
(c) The CEC NEON Shares may not be sold, pledged, hypothecated
or otherwise transferred by CEC (except to an Affiliate) until such shares are
no longer restricted in accordance with the provisions of this Section 2.03. In
addition, if by the fifth anniversary of the Final Termination Date, any CEC
NEON Shares remain restricted, CEC (or any Affiliate to whom such shares have
been transferred) shall forfeit all of its rights to such shares, and shall
promptly surrender to NEON a certificate or certificates representing such
shares. The term "restrictions" as used in this Agreement in reference to the
CEC NEON Shares shall refer to the restrictions set forth in this Section
2.03(c). "Restricted" shares are shares that continue to be subject to such
restrictions. CEC will be entitled to vote all CEC NEON Shares and will be
entitled to all dividends payable with respect thereto irrespective of whether
such shares are restricted or unrestricted (or whether such shares are held in
the name of the Escrow Agent if the Reorganization is abandoned pursuant to
Section 10 of this Agreement); provided, however, that in-kind dividends
declared with respect to restricted CEC NEON Shares shall remain "restricted"
until such CEC NEON Shares become unrestricted.
(d) Notwithstanding the foregoing, except as provided in
Section 10.01(f) of this Agreement, and except for transfers to Affiliates, CEC
and its Affiliates shall not sell, pledge, hypothecate or otherwise transfer any
CEC NEON Shares prior to the first anniversary of the Closing Date.
(e) Subject to the provisions of Section 10 of this Agreement,
each certificate representing the CEC NEON Shares shall bear a restrictive
legend in substantially the following form, provided that, after the first
anniversary of the Closing Date, CEC shall be entitled to have such legend
removed from the certificate or certificates representing any shares which are
no longer restricted in accordance with the provisions of this Section 2.03:
"The shares represented by this Certificate are subject to certain
restrictions on transfer and a right of forfeiture in favor of the
Company as set forth in a Subscription Agreement, dated as of
November 23, 1999, by and between the Company, its Affiliate and the
holder of this Certificate, a copy of which is available from the
Company or the holder of this Certificate upon request."
8
[Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.]
(f) The percentage of shares of NEON Common Stock and the absolute number of
shares of NEON Common Stock to which CEC shall be entitled pursuant to this
Section 2.03 shall not be affected by the public trading price for NEON Common
Stock.
2.04. Consideration for the CEC NEON Shares. In consideration of the
issuance of the CEC NEON Shares to CEC (or to the Escrow Agent for the benefit
of CEC and the release of such shares to CEC by the Escrow Agent in accordance
with the Escrow Agreement in the event that the Reorganization is abandoned
pursuant to Section 10 of this Agreement), at the Closing, CEC shall execute and
deliver the System Agreement, pursuant to which CEC shall make all CEC In-Kind
Capital Contributions and CEC Cash Contributions as contemplated therein, in
addition to the other covenants of CEC set forth in this Agreement and in the
Related Agreements.
2.05. Certain Rights to Acquire Additional Shares.
(a) If either of the NEON Entities engages in a sale or
exchange of its capital stock in connection with a merger or acquisition
transaction (a "Pre-closing Acquisition Transaction"), which is consummated
between the date hereof and the earlier of the Closing Date and the Final
Termination Date, then CEC, on the Closing Date, may, at its option, purchase
up to a number of shares of NEON Common Stock which is equal to the product of
[ ** ]% [ ** ] the total number of shares of NEON Common Stock (on a fully-
diluted basis) sold in connection with such transaction. The purchase price per
share of such shares shall be equal to the average closing price of the NEON
Common Stock on the Nasdaq National Market for the 20 trading day period
preceding the public announcement of such Pre-closing Acquisition Transaction
(or, in the event that such Pre-Closing Acquisition Transaction is not
publically announced, the closing date of such transaction).
(b) For the first [ ** ] or fewer options which Old NEON
grants under its option plans to purchase shares of its Common Stock between the
date of this Agreement and the Closing Date, then CEC, on the Closing Date, may,
at its election, purchase up to a number of shares of NEON Common Stock which is
equal to the product of [ ** ]% [ ** ] the number of shares subject to all such
options. The per share price of shares purchased by CEC pursuant to the
preceding sentence shall be the weighted average of the exercise prices per
share for such options. If the Company grants more than [ ** ] options to
purchase shares of its Common Stock under its option plans between the date of
this Agreement and the Closing Date, then, in addition to the shares of Common
Stock which CEC is entitled to purchase on the Closing Date pursuant to the
first sentence of this Subsection 2.05(b), the number of CEC NEON Shares shall
be increased at no cost to CEC by a number of shares which is equal to the
product of [ ** ]% [ ** ] the number of shares subject to such options in excess
of [ ** ].
9
3. Representations and Warranties of the NEON Entities. As of the date of
this Agreement and the Closing Date, the NEON Entities, jointly and severally,
make the representations and warranties to CEC set forth below.
3.01. Organization and Qualification. Each of the NEON Entities is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as is now being conducted. Each of the NEON Entities is duly qualified or
licensed and in good standing to do business in each jurisdiction where the
conduct of its business or the ownership, leasing or operation of its respective
properties require such qualification or licensing, except where the failure to
be so qualified or licensed and in good standing, individually or in the
aggregate, would not have a material adverse effect on the business of such NEON
Entity.
3.02. Authority Relative to This Agreement. Each of the NEON
Entities has all necessary corporate power and authority to execute and deliver
this Agreement and, as applicable, the Related Agreements and to consummate the
transactions contemplated by this Agreement and such Related Agreements. The
execution and delivery by each of the NEON Entities of this Agreement and the
applicable Related Agreements and the consummation by each of the NEON Entities
of the transactions contemplated by this Agreement and such Related Agreements
have been duly and validly authorized by the Board of Directors of each of the
NEON Entities or by a committee thereof to whom such authority has been
delegated and no other corporate proceedings on the part of either of the NEON
Entities are necessary to authorize this Agreement or the Related Agreements or
the consummation of the transactions contemplated by this Agreement or the
Related Agreements. This Agreement and the Related Agreements have been duly and
validly executed and delivered by the NEON Entities and, assuming that this
Agreement and the Related Agreements constitute valid and binding agreements of
each other party hereto and thereto, constitute valid and binding agreements of
the NEON Entities, enforceable against each of the NEON Entities in accordance
with their respective terms, except as set forth in the NEON Opinion of Counsel.
3.03. Consents and Approvals; No Violation.
(a) Other than the NEON Required Regulatory Approvals and
requisite board and stockholder approvals, no material declaration, filing or
registration with, or notice to, or authorization, consent or approval of any
Governmental Authority or any consent from a third party, including any bank,
alliance partner, lender, investor or other Person, is necessary for the
consummation by the NEON Entities, or either of them, of the transactions
contemplated by this Agreement or the Related Agreements.
10
(b) Neither the execution and delivery of this Agreement or
the Related Agreements by each of the NEON Entities, as applicable, nor the sale
by NEON of the CEC NEON Shares pursuant to this Agreement will (i) conflict with
or result in any breach of any provision of the respective Certificate of
Incorporation or By-laws of either of the NEON Entities, (ii) result in a
default (or give rise to any right of termination, cancellation or acceleration)
or constitute an event which, with or without the giving of notice, lapse of
time, or both, would constitute a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement, lease or
other instrument or obligation to which either of the NEON Entities is a party
or by which either of the NEON Entities or any of its respective properties is
or may be bound or (iii) except for the NEON Required Regulatory Approvals,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to either of the NEON Entities or any of their respective properties.
(c) To the knowledge of the NEON Entities, there is no reason
that Old NEON should fail to obtain the NEON Required Regulatory Approvals on or
before the Closing Date.
3.04. NEON SEC Documents. The capitalization of Old NEON, as well as
its quarterly and annual balance sheets, statements of income and statements of
cash flows, are disclosed in all material respects in the NEON SEC Documents in
conformity with applicable SEC rules and regulations. The filed NEON SEC
Documents, at the time filed with the SEC, conformed in all material respects to
the then applicable requirements of the Securities Act and the Exchange Act.
3.05. Legal Proceedings. Except as set forth in the NEON SEC
Documents, there are no claims, actions, proceedings or investigations pending
or, to the knowledge of each of the NEON Entities, threatened against or
relating to either of the NEON Entities which would, individually or in the
aggregate, be reasonably expected to create a material adverse effect on the
business, operations or prospects of NEON or Old NEON.
3.06. Capital Stock Documents. Old NEON has provided copies of or
disclosed in this Agreement all material contracts contemplated by the issuance
or commitment to issue any capital stock of the NEON Entities or warrants for
any capital stock of the NEON Entities. Such contractual documentation is true,
complete and correct in all material respects and has not been amended or
supplemented in any way. Each such contract has either been fully performed in
all material respects or remains in full force and effect, as the case may be
except for those that have been terminated in accordance with their terms.
3.07. Shareholders Agreement; Corporate Governance Documents. Old
NEON has provided to CEC a copy of the Principal Shareholders Agreement. To the
knowledge of the NEON Entities, this copy is true, complete and correct and have
not been amended or supplemented in any way and remains in full force and
effect. Old
11
NEON has provided to CEC copies of the Certificate of Incorporation and by-laws
of each of the NEON Entities. Each such copy is true, complete and correct and
each such document has not been amended or supplemented and remains in full
force and effect.
3.08. Other Contracts. Except as prohibited by applicable
nondisclosure obligations, Old NEON has provided to CEC copies of (i) all
material contracts for sale or lease by either or both of the NEON Entities of
services or products; (ii) all material vendor contracts for sale or lease to
either or both of the NEON Entities of services of products; (iii) all material
contracts for maintenance, repair and/or operations; (iv) all material
right-of-way, conduit or similar leases for use by either or both of the NEON
Entities to deploy their respective network; and (v) all material employee
contracts with either or both of the NEON Entities or any subsidiary of either
of them, whether such subsidiary is direct or indirect or wholly or majority
owned. Each such copy is true, complete and correct in all material respects and
each such contract has not been amended or supplemented and remains in full
force and effect. To the extent that either or both of the NEON Entities is
prohibited from providing copies of certain material contracts as a result of
contractual nondisclosure obligations, such NEON Entity shall use commercially
reasonable efforts to obtain consent to release such documents to CEC and, upon
the receipt of such consent, shall promptly release copies of such documents to
CEC.
3.09. CEC NEON Shares. The CEC NEON Shares, when issued and
delivered to CEC and no longer restricted in accordance with this Agreement (or
when issued and delivered to the Escrow Agent and when released to CEC in the
event that the Reorganization is abandoned pursuant to Section 10 of this
Agreement), will be duly and validly issued, fully paid and nonassessable, and
free and clear of any preemptive rights, liens and encumbrances. Assuming the
accuracy of the representations made by CEC set forth in Section 4.04 below, the
issuance and sale of the CEC NEON Shares and any other shares of Common Stock
issued to CEC pursuant to this Agreement constitute transactions exempt from
registration under the Securities Act in reliance on the exemption therefrom
provided under Section 4(2) of the Securities Act.
3.10. No Property or Business Activity other than for the
Reorganization. NEON was incorporated on November 22, 1999, and, prior to the
Reorganization, neither NEON nor NEON Acquisition has owned any assets (other
than, in the case of NEON, its ownership of NEON Acquisition) or has engaged in
any business operations other than in connection with the Reorganization.
4. Representations and Warranties of CEC. As of the date of this Agreement
and the Closing Date, CEC makes the representations and warranties to the NEON
Entities as set forth in each Section of this Section 4.
4.01. Organization and Qualification. It is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has
12
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as is now being conducted. It is a
wholly-owned subsidiary of Parent.
4.02. Authority Relative to this Agreement. It has all necessary
power and authority to execute and deliver this Agreement and the Related
Agreements and, subject to the CEC Required Regulatory Approvals, to consummate
the transactions contemplated hereby and thereby. Its execution and delivery of
this Agreement and the Related Agreements and its consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of CEC or by a committee thereof to which
such authority has been delegated and no other proceedings on its part are
necessary to authorize this Agreement or the Related Agreements or the
consummation of the transactions contemplated hereby or thereby. It has duly and
validly executed and delivered this Agreement and the Related Agreements and,
assuming that this Agreement and the Related Agreements constitute valid and
binding agreements of each other party thereto, then this Agreement and the
Related Agreements constitute valid and binding agreements, enforceable against
it in accordance with their respective terms, except as set forth in the CEC
Opinion of Counsel.
4.03. Consents and Approvals.
(a) Other than the CEC Required Regulatory Approvals, no
material declaration, filing or registration with, or notice to, or
authorization, consent or approval of any Governmental Authority is necessary to
be made or obtained by CEC for its consummation of the transactions contemplated
by this Agreement or the Related Agreements.
(b) Neither its execution and delivery of this Agreement or
the Related Agreements nor its exchange of the CEC NEON Shares pursuant to this
Agreement will (i) conflict with or result in any breach of any provision of its
Certificate of Incorporation or By-laws, (ii) result in a default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation or by which it or any of its
properties is or may be bound or (iii) except for the CEC Required Regulatory
Approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to it or its properties.
(c) To the knowledge of CEC, there is no reason that CEC
should fail to obtain the CEC Required Regulatory Approvals.
4.04. Acquisition of Shares Solely for Investment. CEC is acquiring
the CEC NEON Shares and all other shares of Common Stock issuable to CEC
pursuant to this Agreement for its own account for investment only, and not with
a view to, or for sale in connection with, any distribution of such shares in
violation of the Securities Act or any rule or regulation under the Securities
Act.
13
[Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.]
5. Covenants of the NEON Entities
5.01. Conduct of Business between the Date of the Agreement and the
Closing Date. From the date of this Agreement through and including the Closing
Date, each of the NEON Entities agrees to operate their respective business and
conduct their respective operations in the ordinary course consistent with their
past practice.
5.02. Deliver CEC NEON Shares at Closing. At the Closing and upon
the terms and subject to the satisfaction of the conditions in this Agreement,
NEON agrees to deliver the CEC NEON Shares to CEC (or to the Escrow Agent in the
event that the Reorganization is abandoned pursuant to Section 10 of this
Agreement).
5.03. Directors' and Officers' Insurance. Each of the NEON Entities
agrees to provide directors' and officers' liability insurance coverage for any
CEC-appointed director who is on the Board of Directors of NEON. The NEON
Entities agree that this liability insurance coverage shall be for a minimum of
$10 million and shall apply to specified claims as listed in such coverage
documents, preliminary copies of which shall be delivered by the NEON Entities
to CEC prior to the Closing against any such person in respect of his or her
service on the NEON Board of Directors including any claim(s) made following the
final date of service for such person on the NEON Board of Directors. The NEON
Entities shall not take any action that would void or cancel such liability
insurance coverage at any time during the tenure of any director designated by
CEC and for a period of seven years thereafter without the prior written consent
of such director. Any CEC-appointed director shall be a third party beneficiary
for the purpose of this Section 5.03.
5.04. Redemptions of NEON Common Stock. Each of the NEON Entities
agrees that it will not individually or in conjunction with the other NEON
Entity, engage in redemptions of NEON's Common Stock that would increase CEC's
percentage ownership of NEON Common Stock above [ ** ]% (or [ ** ]%, if and when
CEC elects to reduce its percentage ownership to such percentage) without CEC's
prior written consent.
5.05. Right of First Refusal.
(a) From and after the Closing Date, each of the NEON Entities
shall not sell or agree to sell any shares of its capital stock in connection
with any private placement of debt or equity securities (not including a private
placement pursuant to Rule 144A under the Securities Act) which is intended
solely to finance operations of the NEON Entities (a "Money Raising
Transaction"), unless in each such case the NEON Entities shall have first
complied with this Section.
(b) Each of the NEON Entities shall deliver to CEC a written
notice of any proposed Money Raising Transaction which shall (i) identify and
describe the price and other terms upon which the securities (the "Offered
Securities") are to be
14
offered, (ii) identify the persons or entities to which the Offered Securities
are to be sold and (iii) offer to sell to CEC such portion of the Offered
Securities as the aggregate number of shares of capital stock then held by CEC
bears to the total number of shares of NEON Common Stock then currently
outstanding on a fully-diluted basis (excluding shares authorized but unissued
under employee stock plans of Old NEON) (the "Written Offer"). CEC shall have
the right for a period of 20 days following delivery of the Written Offer (the
"Acceptance Period") to notify the applicable NEON Entity of its intent to
purchase, at the price and upon the other terms specified in the Written Offer,
some or all of the number of the Offered Securities which it is entitled to
purchase under this Section 5.05(b).
(c) To accept a Written Offer, in whole or in part, CEC must
deliver a written notice to the applicable NEON Entity prior to the expiration
of the Acceptance Period, which notice shall set forth the amount of Offered
Securities that CEC elects to purchase (an "Acceptance Notice"). In the event
that the applicable NEON Entity does not receive an Acceptance Notice from CEC
prior to the expiration of the Acceptance Period, such NEON Entity may, at its
option, consummate the Money Raising Transaction on substantially the terms set
forth in the Written Offer without further obligation to CEC under this Section
5.05.
(d) CEC's right to participate in a Money Raising Transaction
pursuant to this Section shall not apply to transactions which are not intended
solely to raise cash ("Excluded Transactions"). Excluded Transactions shall
include, without limitation, transactions involving the creation of strategic
business relationships, transactions under stock incentive plans of either of
the NEON Entities and transactions in which either of the NEON Entities'
securities are to be issued in consideration of services or other non-cash
consideration.
(e) The provisions of this Section 5.05 shall terminate in
their entirety upon the earlier of (a) the sale of all or substantially all of
the assets or outstanding capital stock of NEON, or a merger involving NEON
wherein the stockholders of NEON immediately prior to such merger no longer hold
at least 50% of the outstanding capital stock of NEON after such merger, and
(b) the date on which CEC shall hold less than one half of the percentage of the
outstanding shares of the NEON Common Stock (and all other classes of NEON's
capital stock carrying voting rights) beneficially owned by Exelon or CEC (or
their respective Affiliates), whichever is lower, on the Closing Date.
5.06. [Intentionally Omitted]
15
5.07. Pre-Closing Disclosure of Material Events. In the event that
either or both of the NEON Entities intend to become a party to a transaction
involving a merger, acquisition or disposition of assets and/or stock (an "M&A
Transaction") prior to Closing, the NEON Entities shall provide CEC with prior
notice of such transaction, although such NEON Entity or Entities shall not be
required to obtain CEC's approval prior to engaging in any M&A Transaction. In
the event that either or both of the NEON Entities enter into an M&A Transaction
in which such NEON Entity or Entities are not surviving entities, such NEON
Entity or Entities shall obtain from the entity surviving such transaction a
written agreement obligating such entity to assume the obligations of such NEON
Entity or Entities under this Agreement and the Related Agreements, which
agreement shall be executed and delivered to CEC concurrently with the closing
of such M&A Transaction.
5.08. Nasdaq Listing. The NEON Entities shall use their best efforts
to list, subject to notice of issuance, the CEC NEON Shares on the Nasdaq Stock
Market.
5.09. Tax Reporting. The NEON Entities shall, in a manner consistent
with applicable law, (i) report all contributions of property by CEC to NEON
pursuant to the System Agreement as transfers to a controlled corporation
qualifying for treatment under Section 351 of the Internal Revenue Code of 1986,
as amended (the "Code"), and (ii) determine the tax basis in the assets so
contributed by CEC to NEON in accordance with the provisions of the Code and
treasury regulations as applicable to an exchange to which Section 351 of the
Code applies.
5.10. Prohibited Actions Pending the Closing. Unless otherwise
provided for herein or approved by CEC in writing, from the date hereof until
the Closing Date, neither of the NEON Entities shall:
(a) amend or otherwise change its Certificate of Incorporation
or By-laws, except as contemplated by this Agreement;
(b) cease to be engaged in the businesses in which it is
presently engaged or enter into any material new line of business not
contemplated by their respective business plans previously provided to CEC and
not related to the provision of telecommunications services;
(c) take any action prior to the Closing Date which would
result in any of the conditions set forth in Article VIII not being satisfied on
the Closing Date;
(d) assume, guarantee or otherwise become responsible for the
obligations of any other party, or agree to do so, except in connection with
indebtedness permitted by clause (a) above or otherwise consistent with past
practice; or
(e) sell or agree to sell any shares of its capital stock in
connection with any Money Raising Transaction.
16
[Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.]
5.11. Additional Actions Pending the Closing. For a period ending on
the earlier of 120 days following the date of this Agreement or the Closing
Date, neither of the NEON Entities shall take any of the following actions
without the prior written consent of CEC, which consent shall not be
unreasonably withheld or delayed:
(a) authorize or incur any additional debt for money borrowed,
or incur additional debt other than (i) intercompany loans or (ii) trade debt or
borrowing consistent with past practice under existing credit arrangements;
(b) except in connection with indebtedness permitted pursuant
to clause (a) above, and except for purchase money security interests granted in
the ordinary course of business, mortgage, pledge or subject to lien or other
encumbrance any of its properties or agree to do so; or
(c) except as contemplated by Section 5.07 above, enter into
or agree to enter into any material agreement, contract or commitment other than
employment, equipment purchase, sales, service, construction, fiber optic
facilities and services or license agreements entered into in the ordinary
course of business.
5.12. Completion of the Reorganization. Old NEON shall use its best
efforts to complete the Reorganization immediately prior to the Closing.
5.13. Survival of Certain Covenants. The Covenants of the NEON
Entities set forth in Sections 5.03, 5.04, 5.05, 5.06 and 5.09 shall survive the
Closing.
6. Reimbursement of Reorganization Costs. In further consideration of the
transactions contemplated by this Agreement and the Related Agreements, CEC
agrees to reimburse Old NEON for [ ** ]% of all reasonable legal, accounting and
other fees and disbursements incurred by the NEON Entities relating to the
Reorganization (the "Reimbursable Expenses") that are actually incurred by the
NEON Entities from and after April 1, 1999 until the Closing Date, except to the
extent that such Reimbursable Expenses have been paid by CEC prior to the
execution of this Agreement, and in any event regardless of whether the
Reorganization is abandoned pursuant to Section 10 of this Agreement. The
obligation of CEC to pay such Reimbursable Expenses, while based on actual costs
incurred by the NEON Entities, shall not exceed $[ ** ], without the prior
written consent of CEC. The Reimbursable Expenses have been estimated, for
budgetary purposes and not in limitation of the reimbursement obligations set
forth in this Section 6, to be $[ ** ] in the aggregate, as follows:
(a) Costs incurred from April 1, 1999 to the execution of
this Agreement, approximately $[ ** ], consisting of $[ ** ] of legal fees and
$[ ** ] in auditor/accounting fees; and
(b) Costs incurred from the execution of this Agreement
through the Closing Date, approximately $[ ** ], consisting of printing costs
(including
17
[Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.]
the registration statement on Form S-4) of $[ ** ], legal fees of $[ ** ],
auditor/accounting fees of $[ ** ], travel and entertainment expenses for a
public information road show in Boston, New York, Philadelphia and elsewhere of
$[ ** ], filing and other costs relating to Nasdaq of $[ ** ] and SEC filing
expenses of $[ ** ].
Upon receipt from either of the NEON Entities of written evidence of the
payment of Reimbursable Expenses, CEC shall reimburse Old NEON in full within 30
days of receipt of such evidence, subject to the aggregate limitation set forth
above. This Section 6 shall supersede all prior agreements between CEC and the
NEON Entities with respect to the subject matter hereof and neither of the NEON
Entities shall be entitled to any duplicate recovery in respect of any of the
foregoing expenses.
7. Covenants of CEC and NEON.
7.01. Consents and Approvals. CEC and the NEON Entities agree to
cooperate and assist one another in obtaining all required consents and
approvals of any Governmental Authority necessary to consummate the transactions
contemplated by this Agreement and the Related Agreements. Such consents and
approvals include but are not necessarily limited to the NEON Required
Regulatory Approvals and the CEC Required Regulatory Approvals. The cooperation
required under this Section shall be at the expense of the party required to
obtain such consent or approval as a condition to the Closing.
7.02. Further Assurances. Subject to the terms and conditions of
this Agreement, each of the parties will use its best efforts to take, or cause
to be taken, all action, and to do, or cause to be done, as soon as possible,
all things necessary, proper or advisable under applicable laws and regulations
to consummate the transactions contemplated by this Agreement and the Related
Agreements, including using its best efforts to ensure satisfaction of the
conditions precedent to each party's obligations under this Agreement (except as
set forth in the definition of "CEC Required Regulatory Approvals" in Section
1.01).
7.03. Public Statements. The parties shall consult with each other
prior to issuing any public announcement, statement or other disclosure with
respect to this Agreement, the Related Agreements or the transactions
contemplated hereby or thereby and shall not issue any such public announcement,
statement or other public disclosure prior to such consultation, except as may
be required by law or based upon advice of counsel. Neither of the NEON Entities
shall use CEC's name, logo trademark or service ▇▇▇▇ in any public advertisement
without CEC's prior written approval, which approval shall not be unreasonably
withheld or delayed.
7.04. [Intentionally Omitted]
18
7.05. Agreement Regarding Private Letter Ruling. The NEON Entities
and CEC agree to cooperate and assist one another in obtaining a private letter
ruling, addressed to each of them, from the Internal Revenue Service to the
effect that (i) the Reorganization and the Contribution Transactions qualify as
exchanges under Section 351 of the Code as to each of CEC and the stockholders
of Old NEON and/or (ii) the Reorganization will qualify as a tax-free
transaction under Section 368(a)(2)(E) of the Code (the "Private Letter
Ruling").
8. Conditions Precedent to Closing
8.01. Conditions Precedent to CEC Obligations.
The obligation of CEC to consummate the transactions
contemplated by this Agreement are subject to the fulfillment (or waiver) on or
prior to the Closing Date of each of the following conditions:
(a) the representations and warranties of the NEON Entities
shall be true and correct on the Closing Date as if made at and as of such date;
(b) the NEON Entities shall have performed the covenants and
agreements contained in this Agreement and in each of the Related Agreements
which are required to be performed by each of them on or prior to the Closing
Date;
(c) the NEON Entities shall have executed and delivered
certified copies of (i) resolutions of their respective Board of Directors (and,
if necessary, the stockholders) authorizing the transactions contemplated by
this Agreement and the Related Agreements, (ii) their respective Certificates of
Incorporation and By-laws and (iii) such other supporting documents and
certificates as CEC may reasonably request;
(d) CEC shall have received
(i) the NEON Opinion of Counsel,
(ii) a certificate of an authorized officer of NEON,
dated as of the Closing Date, to the effect that, to the best of such officer's
knowledge, the conditions imposed on NEON by paragraphs (a), (b) and (c) above
have been satisfied,
(iii) a certificate of an authorized officer of Old
NEON, dated as of the Closing Date, to the effect that, to the best of such
officer's knowledge, the conditions imposed on Old NEON by paragraphs (a), (b)
and (c) above have been satisfied, and
(iv) a copy of each of the Related Agreements executed
by each of the parties thereto, which condition may not be waived prior to the
date that is one Business Day prior to the Final Termination Date;
19
(e) no preliminary or permanent injunction or other order or
decree by any Federal or state court of competent jurisdiction and no statute or
regulation enacted by any Governmental Authority prohibiting the consummation of
the exchange of the CEC NEON Shares or any of the other transactions
contemplated by this Agreement or any of the Related Agreements shall be in
effect;
(f) subject to the provisions of Section 8.03 of this
Agreement, the NEON Required Regulatory Approvals and the CEC Required
Regulatory Approvals shall have been obtained and all conditions to their
effectiveness prescribed therein or otherwise by law, regulation or order shall
have been satisfied; provided, however, that if the CEC Required Regulatory
Approvals and/or the NEON Required Regulatory Approvals are available only on
terms that materially adversely change the economic benefit to CEC of the
contemplated transaction, then such CEC Required Regulatory Approvals and/or
NEON Required Regulatory Approvals shall be deemed not to have been obtained and
the condition set forth in this subsection shall be deemed to be unsatisfied,
whereupon CEC may elect to terminate this Agreement and provide prompt written
notice of such termination to the NEON Entities;
(g) subject to the provisions of Section 10 of this Agreement,
the Reorganization, as described in the Preamble, shall have been completed
immediately prior to the Closing;
(h) the Board of Directors of NEON shall have taken all action
necessary to elect CEC's designee to the Board of Directors of NEON, effective
as of the consummation of the transactions contemplated by this Agreement; and
(i) the CEC NEON Shares shall have been approved as additional
shares of NEON Common Stock for listing upon notice of issuance on the Nasdaq
Stock Market.
8.02. Conditions Precedent to the NEON Entities' Obligations.
The obligation of the NEON Entities to consummate the
transactions contemplated by this Agreement are subject to the fulfillment (or
waiver) on or prior to the Closing Date of each of the following conditions:
(a) the representations and warranties of CEC shall be true
and correct on the Closing Date as if made at and as of such date;
(b) CEC shall have performed the covenants and agreements
contained in this Agreement and in each of the Related Agreements which are
required to be performed by it on or prior to the Closing Date;
20
[Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.]
(c) CEC shall have executed and delivered certified copies of
(i) resolutions of the Board of Directors (and, if necessary, the stockholders)
of CEC authorizing the transactions contemplated by this Agreement and the
Related Agreements, (ii) its Certificate of Incorporation and By-laws and (iii)
such other supporting documents and certificates as the NEON Entities may
reasonably request;
(d) NEON shall have received
(i) the CEC Opinion of Counsel,
(ii) a certificate from an authorized officer of CEC,
dated as of the Closing Date, to the effect that to the best of such officer's
knowledge the conditions imposed on such party by paragraphs (a), (b) and (c)
above have been satisfied,
(iii) all requisite stockholder approvals relating to
the contemplated transaction, including without limitation approval of any
applicable registration statement,
(iv) subject to the provisions of Section 10 of this
Agreement, a one-time cash payment from CEC in the amount of $[ ** ], and
(e) no preliminary or permanent injunction or other order or
decree by any Federal or state court of competent jurisdiction and no statute or
regulation enacted by any Governmental Authority prohibiting the consummation of
the exchange of the CEC NEON Shares or any of the other transactions
contemplated by this Agreement or any of the Related Agreements shall be in
effect;
(f) subject to the provisions of Section 8.03 of this
Agreement, the NEON Required Regulatory Approvals and the CEC Required
Regulatory Approvals shall have been obtained and all conditions to their
effectiveness prescribed therein or otherwise by law, regulation or order shall
have been satisfied; provided, however, that if the CEC Required Regulatory
Approvals and/or the NEON Required Regulatory Approvals are available only on
terms that materially adversely change the economic benefit to the NEON Entities
of the contemplated transaction, then such CEC Required Regulatory Approvals
and/or NEON Required Regulatory Approvals shall be deemed not to have been
obtained and the condition set forth in this subsection shall be deemed to be
unsatisfied, whereupon Old NEON may elect to terminate this Agreement and
provide prompt written notice of such termination to CEC; and
(g) subject to the provisions of Section 10 of this Agreement,
the Reorganization, as described in the Preamble, shall have been completed
immediately prior to the Closing.
21
9. Indemnification and Third Party Claims
9.01. Indemnification.
(a) Each party will indemnify and hold harmless the other
party and its Affiliates and their respective directors, officers, employees and
agents (including such other party, individually, an "Indemnified Party" and
collectively, the "Indemnified Parties") from and against any and all claims,
demands or suits by any person, and all losses, liabilities, damages,
obligations, payments, costs, taxes and expenses (including reasonable legal
fees and expenses and including costs and expenses incurred in connection with
investigations and settlement proceedings) (each, an "Indemnifiable Loss"), as
incurred, asserted against or suffered by any Indemnified Parties relating to,
resulting from or arising out of:
(i) any breach by a party of any covenant or agreement
of that party contained in this Agreement or the representations and warranties
of that party; or
(ii) any breach by a party of any Related Agreement to
which it is a party.
If the amount of any Indemnifiable Loss, at any time
subsequent to the making of any indemnity payment in respect thereof, is reduced
by recovery, settlement or otherwise under or pursuant to any insurance
coverage, or pursuant to any claim, recovery, settlement or payment by or
against any other person, the amount of such reduction, less any costs, expenses
or premiums incurred in connection therewith, will promptly be repaid by the
Indemnified Party to the party required to provide indemnification hereunder
(the "Indemnifying Party") with respect to such Indemnifiable Loss.
(b) To the fullest extent permitted by law, no Indemnifying
Party shall be liable to any Indemnified Party for any claims, demands or suits
for consequential, incidental, special, exemplary, punitive, indirect or
multiple damages connected with or resulting from any breach of this Agreement
or any of the Related Agreements (other than breach of this Section 9), or any
actions undertaken in connection with or applicable hereto or thereto.
(c) Other than as set forth in Section 9.03, the rights and
remedies of each party under this Section 9 are, as between and among the
parties, exclusive and in lieu of any and all other rights and remedies which
that party may have under this Agreement and the Related Agreements or otherwise
for monetary relief with respect to (i) any breach of, or failure to perform,
any covenant or agreement set forth in this Agreement or the Related Agreements
by any party or (ii) any breach of any representation or warranty by any party.
Each party agrees that the previous sentence shall not limit or otherwise affect
any non-monetary right or remedy which any party may have under this Agreement
or the Related Agreements or otherwise
22
limit or affect any party's right to seek equitable relief, including the remedy
of specific performance.
(d) The parties agree that, notwithstanding Section 9.01(c),
each party shall retain, subject to the other provisions of this Agreement all
remedies at law or in equity with respect to fraud or willful or intentional
breaches of this Agreement or the Related Agreements.
(e) CEC (on the one hand) and the NEON Entities, jointly and
severally (on the other hand), shall indemnify and hold harmless the other party
and its Affiliates from and against any and all claims of brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement or the Related Agreements by reason of any action taken by the
other party.
9.02. Third Party Claims Procedures.
(a) If any Indemnified Party receives notice of the assertion
of any claim or of the commencement of any claim, action, or proceeding made or
brought by any person who is not a party or an Affiliate of a party (a "Third
Party Claim") with respect to which indemnification is to be sought from an
Indemnifying Party, the Indemnified Party will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event not later than 10
Business Days after the Indemnified Party's receipt of notice of such Third
Party Claim; provided, however, that a failure to give timely notice will not
affect the rights or obligations of any Indemnified Party except if, and only to
the extent that, as a result of such failure, the Indemnifying Party was
materially prejudiced. Such notice shall describe the nature of the Third Party
Claim in reasonable detail and will indicate the estimated amount, if
practicable of the Indemnifiable Loss that has been or may be sustained by the
Indemnified Party.
(b) If a Third Party Claim is made against an Indemnified
Party, the Indemnifying Party will be entitled to participate in the defense
thereof and, if it so chooses, to assume the defense thereof with counsel
selected by the Indemnifying Party; provided, however, that such counsel is not
reasonably objected to by the Indemnified Party; and provided further that the
Indemnifying Party first admits in writing its liability to the Indemnified
Party with respect to all material elements of such claim. Should the
Indemnifying Party so elect to assume the defense of a Third Party Claim, the
Indemnifying Party will not be liable to the Indemnified Party for any legal
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof. If the Indemnifying Party elects to assume the defense of a
Third Party Claim, the Indemnified Party will (i) cooperate in all reasonable
respects with the Indemnifying Party in connection with such defense, (ii) not
admit any liability with respect to, or settle, compromise or discharge, any
Third Party Claim without the Indemnifying Party's prior written consent and
(iii) agree to any settlement, compromise or discharge of a Third Party Claim
which the Indemnifying Party may recommend and which by its terms obligates the
Indemnifying Party to pay the full
23
[Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.]
amount of the liability in connection with such Third Party Claim and releases
the Indemnified Party completely in connection with such Third Party Claim. In
the event the Indemnifying Party shall assume the defense of any Third Party
Claim, the Indemnified Party shall be entitled to participate in (but not
control) such defense with its own counsel at its own expense. If the
Indemnifying Party does not assume the defense of any such Third Party Claim,
the Indemnified Party may defend the same in such manner as it may deem
appropriate, including settling such claim or litigation after giving notice to
the Indemnifying Party of the terms of the proposed settlement and the
Indemnifying Party will promptly reimburse the Indemnified Party upon written
request. Anything contained in this Agreement to the contrary notwithstanding,
no Indemnifying Party shall be entitled to assume the defense of any Third Party
Claim if such Third Party Claim seeks an order, injunction or other equitable
relief or relief for other than monetary damages against the Indemnified Party
which, if successful, would materially adversely affect the business of the
Indemnified Party.
9.03. Other Remedies. In the event that CEC fails to make any
In-Kind Contribution as required by the System Agreement, CEC agrees to
reimburse NEON for any penalties paid to NEON's customers as a direct result of
such failure; provided, however, CEC shall only be required to reimburse NEON
for such penalties incurred by NEON after the expiration of eight months after
CEC obtains all CEC Required Regulatory Approvals or September 1, 2000,
whichever is later, and no such penalties incurred prior to such date.
Notwithstanding the preceding sentence, CEC shall not be obligated to reimburse
NEON if, and only to the extent that, it becomes impossible for CEC to so
perform as a result of a Force Majeure (as defined in the System Agreement).
9.04. Limitation of Liability. Under no circumstance shall the
aggregate of (1) CEC's liability to NEON in connection with the transactions
contemplated by this Agreement, the System Agreement and all of the Related
Agreements and (2) Parent's liability under Section 12.12 of this Agreement and
Section 7.17 of the System Agreement exceed $[ ** ].
10. Alternative Transaction Structure.
10.01. Failure to Obtain Private Letter Ruling. In the event that
the Internal Revenue Service clearly indicates orally or in writing to both
parties either that it is unwilling to render all or any part of the Private
Letter Ruling or that it believes that the Reorganization and the Contribution
Transaction will not qualify as exchanges under Section 351 of the Code as to
either CEC or the stockholders of Old NEON or that the Reorganization will not
qualify as a tax-free transaction under Section 368(a)(2)(E) of the Code, or at
the mutual election of CEC and NEON, then:
(a) NEON shall not be required to effect the Reorganization;
24
(b) NEON shall not be required to perform the covenants set
forth in Section 5.09;
(c) CEC shall not be required to make the cash payment to NEON
pursuant to Section 8.02(d)(iv);
(d) CEC and Old NEON shall be obligated to consummate the
transactions contemplated by this Agreement, provided that all conditions
precedent to such parties obligations (except those set forth in Sections
8.01(g) and 8.02(g)) have been satisfied;
(e) in lieu of the provisions relating to the restrictions on
the NEON Shares set forth in Section 2.03 of this Agreement, at the Closing,
NEON shall deliver the CEC NEON Shares to the Escrow Agent for the benefit of
CEC, the parties will enter into the Escrow Agreement at the Closing, and, no
later than three days following the completion of the events set forth in
Section 2.03(a) (in no particular order, except as explicitly set forth
therein), NEON shall cause the Escrow Agent to release to CEC the respective
percentages of CEC NEON Shares set forth in Section 2.03(a);
(f) Notwithstanding the provisions of Section 2.05 of this
Agreement, prior to the first anniversary of the Closing Date, CEC shall be
entitled to sell a number of CEC NEON Shares having a value equal to the tax
obligations payable by it prior to the first anniversary of the Closing Date as
a result of the transactions contemplated by this Agreement and the Related
Agreements, up to the number of CEC NEON Shares then released to CEC under the
terms of this Agreement and the Escrow Agreement (the "Tax Shares"). Credit
Suisse First Boston, or such other investment bank of national standing as NEON
may elect (in either case, the "Default Investment Bank"), shall act as the
broker for any such sale of Tax Shares; provided, however, that CEC shall have
the right to select another investment bank of national standing (an
"Alternative Investment Bank") to effect the sale of Tax Shares, if (i) the
aggregate fees and commissions imposed by the Alternative Investment Bank are
materially less than the fees quoted by the Default Investment Bank, and (ii)
the Default Investment Bank has been offered the opportunity to meet such level
of fees and commissions quoted by such Alternative Investment Bank but is
unwilling to meet such terms. Any such sale or sales of Tax Shares shall be made
in a manner that will, in the reasonable judgment of NEON, avoid disruption of
the market for NEON Common Stock. On each occasion that CEC desires to sell any
Tax Shares pursuant to this Section 10.01(e), it shall give written notice to
NEON of its desire to do so, which written notice shall set forth, in reasonable
detail, the calculation of the taxes due, the number of Tax Shares, the date
that such taxes are due, and the proposed method of disposition of the Tax
Shares. CEC shall not sell any Tax Shares until it has received NEON's written
consent to such sale, which consent shall not be unreasonably withheld,
conditioned or delayed. If requested by CEC, NEON shall promptly file and have
declared effective a Registration Statement on Form S-3 (if NEON is then
eligible to use such form)
25
covering the resale of the Tax Shares. Such registration shall be subject to the
terms and conditions of the Registration Rights Agreement, provided however that
such registration shall not count as a demand registration under Section 2.1(a)
of the Registration Rights Agreement; and
(g) In lieu of the restrictive legend provided in Section
2.03, each certificate representing the CEC NEON Shares shall bear a restrictive
legend in substantially the following form, provided that, after the first
anniversary of the Closing Date, CEC shall be entitled to have such legend
removed from the certificate or certificates representing any shares which have
been released by the Escrow Agent consistent with the terms of the Escrow
Agreement:
"The shares represented by this Certificate are subject to certain
restrictions in favor of the Company as set forth in a Subscription
Agreement, dated as of November 23, 1999, by and between the
Company, its Affiliate and CEC Delaware, Inc., and in an Escrow
Agreement, dated as of _________________, by and among the Company
and Consolidated Edison Communications, Inc. and State Street Bank
and Trust Company."
10.02. References to NEON Entities. In the event that the
Reorganization is abandoned pursuant to this Section 10, then references herein
and in the Related Agreements to the NEON Entities or any entities affiliated
with NEON shall refer to Old NEON only, as the context requires.
11. Termination
11.01. Mutual Termination. This Agreement may be terminated at any
time prior to the Closing by an instrument in writing signed on behalf of each
of the parties.
11.02. Termination Date. This Agreement may be terminated by any
party if the Closing shall not have occurred on or before the six-month
anniversary of the date on which the request for the Private Letter Ruling is
filed with the IRS (the "Final Termination Date"); provided, however, that the
right to terminate this Agreement pursuant to this Section 11.02 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 Closing to
occur on or before such date.
12. Miscellaneous Provisions
12.01. Expenses. Except to the extent specifically provided herein
and in the Reimbursement Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the party
26
incurring such costs and expenses, whether or not the transactions contemplated
hereby are consummated.
12.02. Amendment and Modification; Extension; Waiver. This Agreement
may be amended, modified or supplemented only by an instrument in writing signed
on behalf of each of the parties. Either party may (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties of the other party
contained in this Agreement or (iii) waive compliance by the other party with
any of the agreements or conditions contained in this Agreement. Any agreement
on the part of a party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by such party. 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 such rights.
12.03. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given (as of the time of delivery or, in the
case of a telecopied communication, of confirmation and accompanied by another
manner of giving notice provided in this Section) if delivered personally,
telecopied (which is confirmed) or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
if to NEON or Old NEON, to:
NorthEast Optic Network, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
if to CEC or CECD, to:
Consolidated Edison Communications, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
27
CEC Delaware, Inc.
c/o Corporation Trust Company
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ Trust Center
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Consolidated Edison, Inc.
▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Senior Vice President and General Counsel
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
12.04. Assignment; No Third Party Beneficiaries.
(a) Neither Party shall assign its rights or obligations under
this Agreement to any third person or entity (except an Affiliate of such Party)
without the prior written approval of the other Party, which approval shall not
be unreasonably withheld or delayed; provided, however, that CEC may assign its
right to receive the CEC NEON Shares (but not including any other right or
obligation of CEC hereunder or under any of the Related Agreements, except to
the extent expressly provided herein or therein) to CECD, a wholly-owned
subsidiary of CEC, or any other Affiliate. Subject to the foregoing, this
Agreement and the Related Agreements and all of the provisions hereof shall be
binding upon and inure to the benefit of CEC and the NEON Entities and their
respective successors and assigns.
(b) Nothing in this agreement is intended to confer upon any
other person except the parties any rights or remedies hereunder or shall create
any third party beneficiary rights in any person, except as explicitly
contemplated in Section 5.03.
12.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law).
12.06. Counterparts. 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.
12.07. Interpretation. When a reference is made in this Agreement to
a Section, Subsection, Exhibit, Schedule or Appendix, such reference shall be to
a Section or Subsection of, or Exhibit to, this Agreement unless otherwise
indicated. 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. Whenever
28
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation" or equivalent
words. The words "hereof", "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in the Related Agreements and any
certificate or other document made or delivered pursuant hereto or thereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument, statute, regulation, rule or order defined or referred to
herein or in any agreement or instrument that is referred to herein means such
agreement, instrument, statute, regulation, rule or order as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
rules or orders and references to all attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns.
12.08. Jurisdiction and Enforcement. Each of the parties irrevocably
submits to the exclusive jurisdiction of (i) the Supreme Court of the State of
New York and (ii) the United States District Court for the Southern District of
New York, for the purposes of any suit, action or other proceeding arising out
of this Agreement or any transaction contemplated hereby. Each of the parties
agreed to commence any action, suit or proceeding relating hereto either in the
United States District Court of Delaware or, if such suit, action or proceeding
may not be brought in such court for jurisdictional reasons, in the Supreme
Court of Delaware. Each of the parties further agrees that service of process,
summons, notice or document by hand delivery or U.S. registered mail at the
address specified for such party in Section 12.03 (or such other address
specified by such party from time to time pursuant to Section 12.03) shall be
effective service of process for any action, suit or proceeding brought against
such party in any such court. Each of the parties irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) the Supreme Court of Delaware, or (ii) the United States District
Court of Delaware, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
12.09. Entire Agreement. This Agreement and the Related Agreements
including the Exhibits, Schedules, Appendices, documents, certificates and
instruments referred to herein or therein and other contracts, agreements and
instruments contemplated hereby or thereby, together with the Confidentiality
Agreements, embody the entire agreement and understanding of the parties in
respect of the transactions contemplated by this Agreement. There are no
restrictions, promises, representations, warranties, covenants or undertakings
other than those expressly set
29
forth or referred to herein or therein. This Agreement and the Related
Agreements supersede all prior agreements and understandings between or among
the parties or any of the parties with respect to the transactions contemplated
hereby and thereby, other than the Confidentiality Agreements which remain in
effect according to the terms and conditions set forth therein.
12.10. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
12.11. Conflicts. Except as expressly otherwise provided herein or
therein, in the event of any conflict or inconsistency between the terms of this
Agreement and the terms of any Related Agreement, the terms of this Agreement
shall prevail.
12.12. Guaranty of CEC's Obligations. Parent unconditionally
guaranties the due and prompt payment, but not the performance, of all of CEC's
obligations set forth in this Agreement. The parties agree that Parent does not
guaranty the performance of CEC's obligations set forth in this Agreement,
including, without limitation, the performance of any actions requiring any
Governmental Authority consent or approvals. This guaranty is an irrevocable
guaranty of payment (and not just of collection) and shall continue in effect
notwithstanding any extension or modification of the terms of this Agreement,
any assumption of any such guarantied obligation by any other party or any other
act or event which might otherwise operate as a legal or equitable discharge of
Parent under this Section 12.12. This guaranty is in no way conditioned upon any
requirement that either or both of the NEON Entities first attempt to collect or
enforce any guarantied obligation from or against CEC, provided however, that
such NEON Entity or Entities has first requested payment, has not refused
payment, and has not received payment with 30 days from CEC. So long as any
obligation of CEC to either or both of the NEON Entities remains unpaid or
undischarged, Parent hereby waives (but only with respect to such NEON Entity or
Entities and not as to any other parties) all rights to subrogation arising out
of any payment by Parent under this Section 12.12. Parent hereby waives all
special suretyship defenses, and protest, notice of protest, demand for
performance, diligence, notice of any other action at any time taken or omitted
to be taken by either or both of the NEON Entities or CEC and, generally, all
demands and notices of every kind in connection with this Section 12.12. If any
of the waivers set forth in this Section 12.12 is determined to be contrary to
any applicable law or public policy, such waivers shall be effective only to the
extent permitted by law. This guaranty is subject to the limitations of
liability set forth in Section 9.04 of this Agreement.
30
12.13. Force Majeure. The pre-closing and post-closing obligations
of the Parties under this Agreement are subject to, and neither party shall be
in default under this Agreement due to, any Force Majeure. For purposes of this
Agreement, "Force Majeure" means any failure or delay in performance which, by
exercise of due foresight by the party affected could not reasonably have been
expected to avoid and, which by exercise of due diligence, such party shall be
unable to overcome during the period while such party shall continue to exercise
due diligence, and that is caused by strike or other labor problems; accidents;
acts of God; fire; flood; adverse weather conditions; material or facility
shortages or unavailability not resulting from such party's failure to timely
place orders therefor; lack of transportation; the imposition of any
governmental codes, ordinances, laws, rules, regulations or restrictions after
the date of this Agreement (but not related to the obtaining or maintaining of
the Required Rights (as defined in the System Agreement)); condemnation or the
exercise of rights of eminent domain; or war, acts of war (whether declared or
undeclared), terrorism or civil disorder. Neither party shall, however, be
relieved of liability for failure of performance due to a claimed Force Majeure
hereunder if such failure is due to causes arising out of its own gross
negligence or to removable or remediable causes that it fails to remove or
remedy with reasonable dispatch. Any party affected by an event of Force Majeure
shall promptly notify the other party of any occurrence or condition which in
the affected party's reasonable opinion warrants an extension of time for the
performance of any obligation under this Agreement. Such notice must be
submitted in writing to the other party within five days or such sooner date as
is practicable after the delay is know to the affected party, or shall, in the
exercise of reasonable diligence, become known. Such notice shall specify in
detail the anticipated length of the delay, the cause of the delay, and a
timetable by which any remedial measures shall be implemented. Failure to
provide such notice within such period shall constitute a waiver of any claim of
Force Majeure.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
31
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective duly authorized officers as of the date first above written.
Consolidated Edison Communications, Inc. NorthEast Optic Network, Inc.
By: By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------- -------------------------------
Name: Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
Title: Title: Chairman & CEO
--------------------------------
NEON Communications, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman & CEO
In accordance with and subject to the terms of Section 12.12 of this Agreement,
the obligations of Consolidated Edison Communications, Inc. are hereby
irrevocably guarantied in full.
Consolidated Edison, Inc.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
COUNTY OF ___________________ )
) ss.
STATE OF _____________________ )
Before me, the undersigned Notary Public, in and for said County and
State, personally appeared the above-named ________________________, known to me
to be the _______________ of NorthEast Optic Network, Inc., who, being duly
sworn, acknowledged that he/she did sign the above instrument and that the same
is her free act and deed.
WITNESS my hand and official seal this 23rd day of November, 1999.
Notary Public
32
My Commission Expires:__________________
COUNTY OF ___________________ )
) ss.
STATE OF _____________________ )
Before me, the undersigned Notary Public, in and for said County and
State, personally appeared the above-named ________________________, known to me
to be the _______________ of NEON Communications, Inc., who, being duly sworn,
acknowledged that he/she did sign the above instrument and that the same is her
free act and deed.
WITNESS my hand and official seal this 23rd day of November, 1999.
Notary Public
My Commission Expires:__________________
COUNTY OF ___________________ )
) ss.
STATE OF _____________________ )
Before me, the undersigned Notary Public, in and for said County and
State, personally appeared the above-named __________________, known to me to be
the _______________ of Consolidated Edison Communications, Inc., who, being duly
sworn, acknowledged that he/she did sign the above instrument and that the same
is her free act and deed.
WITNESS my hand and official seal this 23rd day of November, 1999.
Notary Public
My Commission Expires:__________________
COUNTY OF ___________________ )
) ss.
STATE OF _____________________ )
Before me, the undersigned Notary Public, in and for said County and
State, personally appeared the above-named __________________, known to me to be
the _______________ of Consolidated Edison, Inc., who, being duly sworn,
acknowledged that he/she did sign the above instrument and that the same is her
free act and deed.
WITNESS my hand and official seal this 23rd day of November, 1999.
Notary Public
33
My Commission Expires:__________________
34