NEON COMMUNICATIONS, INC.
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement dated as of September 14, 2000, is entered into
by and among Mode 1 Communications, Inc. a Connecticut corporation ("M1"),
Exelon Ventures Corp., a Pennsylvania corporation ("Exelon"), Consolidated
Edison Communications, Inc., a New York corporation ("CEC") and NEON
Communications, Inc., a Delaware corporation (the "Company"). M1, Exelon and
CEC are sometimes referred to in this Agreement collectively as the
"Stockholders."
Recitals:
A. M1 owns, either directly or indirectly, certain outstanding shares of the
Common Stock, par value $.01 per share ("Common Stock"), of the Company;
B. Exelon and CEC shall receive certain shares of the Common Stock of the
Company pursuant to the transactions contemplated by those certain
Subscription Agreements, dated as of November 23, 1999, by and between the
Company, NorthEast Optic Network, Inc. and each of Exelon and CEC (as amended
to date, the "Subscription Agreements"), and those certain System Agreements
of even date herewith, by and between the Company and each of Exelon and CEC
(together with the Subscription Agreements, the "Touchdown Agreements"); and
C. The Company and the Stockholders wish to provide for the continuing
representation of the Stockholders on the Board of Directors of the Company
in the manner set forth below.
In consideration of the mutual covenants contained herein and the
consummation of the transactions contemplated by the Touchdown Agreements,
and for other valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Voting of Shares.
(a) In any and all elections of directors of the Company (whether at a
meeting or by written consent in lieu of a meeting), each Stockholder shall
vote or cause to be voted all Shares (as defined in Section 2 below) owned by
it, or over which it has voting control, and otherwise use its respective
best efforts, so as to fix the number of directors of the Company at nine and
to elect (i) two members designated by M1, initially ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇ ▇. ▇▇▇▇▇, (ii) one member designated by Exelon, initially ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ and (iii) one member designated by CEC, initially ▇▇▇▇▇ ▇. ▇▇▇▇;
provided, however, that the Stockholders shall have no obligation to elect
any designee whom the Board of Directors of the Company, in its reasonable
discretion, has deemed an unacceptable candidate for election.
(b) No Stockholder shall vote to remove any director designated by another
Stockholder, except for bad faith or willful misconduct with respect to the
business affairs of the Company on the part of such director.
2. Shares. "Shares" shall mean and include any and all shares of Common
Stock and/or shares of any other class of the capital stock of the Company,
by whatever name called, which carry voting rights (including voting rights
which arise by reason of default) and shall include any such shares now owned
or subsequently acquired by a Stockholder, or any of its respective
affiliates, as such term is defined in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended
("Affiliates"), however acquired, including, without limitation, shares
acquired as a result of any stock splits, stock dividends or
recapitalizations. Without limiting the generality of the foregoing,
"Shares" shall include, as applicable, all shares of Common Stock of the
Company received by Exelon or CEC under their respective Subscription
Agreements including, without limitation, any such shares received by Exelon
or CEC under Section 12.04 ("Assignment; No Third Party Beneficiaries") of
their respective Subscription Agreements.
3. Reduction in Board Representation. Subject to the provisions of Section
4 of this Agreement, in the event that M1 shall hold a number of the
outstanding Shares of the Company which is both (i) equal to or less than the
lower of the number of such shares then held by either Exelon or CEC, and
(ii) less than the number of shares held by such entity on the date hereof
(other than as a result of a reverse stock split, recapitalization or the
like), then M1 shall only be entitled to designate one member of the Board of
Directors pursuant to Section 1(a) of this Agreement.
4. Termination. This Agreement shall terminate in its entirety upon the
sale of all or substantially all of the assets or stock of the Company,
whether by merger, sale of assets or otherwise. If any Stockholder shall
hold less than one half of the percentage of the outstanding Shares of the
Company beneficially owned on the date hereof by Exelon or CEC, whichever is
lower (the "Minimum Percentage"), then such Stockholder's rights and
obligations hereunder (but not the rights and obligations of the other
Stockholders hereunder) shall terminate.
5. No Revocation. The voting agreements contained herein are coupled with
an interest and may not be revoked, except by an amendment, modification or
termination effected in accordance with Section 9(e) hereof. Nothing in this
Section 5 shall be construed as limiting the provisions of Section 4 or 9(e)
hereof.
6. Representations and Warranties. Each Stockholder hereby represents and
warrants to the others that, as of the date of this Agreement, such
Stockholder owns, directly or indirectly, the number of Shares set forth
opposite such Stockholder's name on Schedule 1 hereto.
7. Legend. Each of the Stockholders agrees that, upon the execution of this
Agreement and for so long as this Agreement remains in effect, such
Stockholder will cause all certificates for Shares now owned or hereafter
acquired by such Stockholder to be submitted to the Company, which shall then
cause such certificates to be endorsed with a legend in substantially the
following form:
"This Certificate and the shares represented hereby are subject to
the provisions of a Stockholders' Agreement, dated September 14, 2000,
by and among certain stockholders of the Company. A copy of that
Stockholders' Agreement is on file at the principal office of
the Company and is available from the Company upon request."
8. Right of First Offer; Option to Purchase on Certain Events; Determination
of Fair Market Value.
(a) Right of First Offer. Except as set forth in the last sentence of
Section 8(a), in Section 8(e) or in Section 8(h), no Stockholder shall sell,
transfer or otherwise dispose for value or agree to sell, transfer or
otherwise dispose for value, in either case directly or indirectly (i.e., if
control of the Stockholder, or an Affiliate of the Stockholder which holds
its Shares, is sold or otherwise transferred to a third party other than (A)
an Affiliate of the Stockholder or of such Affiliate of the Stockholder or
(B) in or by way of any merger, consolidation, sale of assets or similar
transaction where control of the ultimate parent of the Stockholder is
assumed or acquired by another entity whose common shares are publicly
traded), all or any of its Shares, unless in each such case such Stockholder
(the "Offering Stockholder") shall have first complied with this Agreement.
Such Offering Stockholder shall deliver to each of the other Stockholders
(the "Offeree Stockholders") a written notice (the "Offer Notice") of any
proposed or intended sale, transfer or other disposition for value of the
Shares (the "Offered Securities"), which Offer Notice shall:
(i) identify the number of Shares to be transferred;
(ii) describe the price and other terms upon which they are to be
sold, transferred or otherwise disposed;
(iii) at the election of the Offering Stockholder, identify the
persons or entities to which the Offered Securities are to be sold,
transferred or otherwise disposed (the "Proposed Transferee"); and
(iv) offer to sell or transfer to each of the Offeree Stockholders
such portion of the Offered Securities as the aggregate number of Shares then
held by such Offeree Stockholder bears to the total number of Shares then
held by all of the Offeree Stockholders (the "Basic Amount").
The terms set forth in the Offer Notice is referred to herein as the "Offer".
In determining the pro rata portions of Shares owned by Exelon or CEC, any
Shares that they have a right to acquire if they satisfy certain objectives
set forth in the Subscription Agreements shall be deemed to be owned by them
for the purposes of this Agreement even if not yet issued to them or issued
to them but subject to divestment if those objectives are not satisfied.
Notwithstanding the foregoing, any Stockholder may sell, transfer or
otherwise dispose of up to 160,000 Shares in any rolling 12-month period,
such amount to be adjusted appropriately in the event of stock splits, stock
dividends, recapitalizations and the like, or any or all Shares owned
beneficially by such Stockholder to an Affiliate of such Stockholder, in
either case without compliance with the terms of this Section 8.
(b) Acceptance Procedures. To accept an Offer, in whole or in part, an
Offeree Stockholder shall deliver a written notice to the Offering
Stockholder (with copies to the other parties to this Agreement) within five
Business Days of the delivery of the Offer Notice (the "Acceptance Date"),
setting forth (i) the portion of such Offeree Stockholder's Basic Amount that
such Offeree Stockholder elects to purchase and (ii) whether such Offeree
Stockholder desires to purchase its pro rata portion or any Offered
Securities not accepted or purchased by the other Offeree Stockholders in
accordance with this Agreement (the "Notice of Acceptance") and confirming
its agreement to pay 105% of the price stipulated in Section 8(a)(ii). For
purposes of this Agreement, "Business Day" shall mean any day other than
Saturday, Sunday and any day which is a legal holiday or a day on which
banking institutions in New York, NY are authorized or required by law or
other action of any applicable governmental authority to close.
(c) Sales Procedures. If less than all Offered Securities are subscribed by
a Notice(s) of Acceptance by the Acceptance Date, then the provisions of this
Agreement shall be deemed satisfied and the Offering Stockholder, during the
100 calendar days following the Acceptance Date, may sell, transfer or
otherwise dispose of the Offered Securities on substantially the terms stated
in the Offer Notice and at a price no lower than the price set forth in the
Offer Notice. If all of the Offered Securities have been subscribed by a
Notice(s) of Acceptance by the Acceptance Date, then the Offeree Stockholders
who have so accepted the Offer shall have 30 calendar days after the
Acceptance Date in which to consummate the purchase (the "Closing Period").
The Closing Period shall be extended by a reasonable period, not to exceed 30
calendar days, in the event that an Offeree Stockholder must obtain
regulatory approval in order to purchase the Offered Securities in compliance
with applicable laws. In the event that any Offeree Stockholder who has
submitted a Notice of Acceptance is unable to consummate the purchase within
the Closing Period for reasons beyond such Offeree Stockholder's control (as
such period may be extended pursuant to the preceding sentence), then the
Offering Stockholder, within 100 calendar days after the expiration of the
Closing Period, may sell, transfer or otherwise dispose of the Offered
Securities on substantially the terms stated in the Offer Notice and at a
price no lower than the price set forth in the Offer Notice. Under no
circumstance shall any Offering Stockholder be required to consummate a sale
to any Offeree Stockholder unless and until all Offered Securities have been
subscribed by a Notice(s) of Acceptance from one or more Offeree Stockholders
which are able to consummate their respective purchases within the Closing
Period, or any permitted extension thereof. Notwithstanding the fact that
the compensation offered by the Proposed Transferee has an in-kind component
(as discussed below), all purchases of Offered Securities by the Offeree
Stockholders shall be made in cash, by certified check or wire transfer of
immediately available funds.
(d) Valuation of In-Kind Compensation. If the compensation offered by the
Proposed Transferee has an in-kind component, then the Offering Stockholder
shall submit an appraisal of the cash value of such in-kind component (which
may be prepared by the Offering Stockholder or by a third party, at the
Offering Stockholder's election) to the Offeree Stockholders with the Offer
Notice. If the Offeree Stockholders, or any of them, desire to obtain an
independent appraisal of the cash value of the in-kind component, such
Offeree Stockholders may do so at their expense (to be shared pro rata among
such Offeree Stockholders), and, except as set forth in the next sentence,
the Acceptance Period shall run from the date such independent appraisal is
rendered (which date shall not be more than 30 calendar days after the date
of the Offer Notice). If the Offering Stockholder does not accept such
independent appraisal, or the parties cannot otherwise agree on the cash
value of the in-kind component within 15 calendar days of the delivery of
such independent appraisal, then the parties shall submit their respective
appraisals to an arbitrator appointed by the Boston Office of the American
Arbitration Association who will choose one of the appraisals, and the
Offering Stockholder and the Offeree Stockholders shall each be responsible
for a pro rata portion of the costs of such arbitration process, which
decision shall be binding upon the parties.
(e) Option to Purchase on Certain Events. Upon any Stockholder's filing for
bankruptcy or other similar relief, making a general assignment for benefit
of its creditors or having a petition for bankruptcy or similar relief filed
against it which results in an order not dismissed within 60 days, the other
Stockholders shall have a right of first offer to purchase their pro rata
portions of the Shares owned by such Stockholder's predecessor in interest
(or, in the case of the debtor in possession, owned by such Stockholder)
under the procedures set forth in Sections 8(b) and (c), except that (i) the
applicable purchase price shall be the Fair Market Value, as determined in
accordance with subsection (f) below, and (ii) if an Offeree Stockholder does
not receive an Offer Notice, the rights of the other Stockholders shall
accrue upon the receipt of actual notice of the event triggering its rights
under this subsection (e). The provisions of Sections 8(a) and 8(b) above
shall also govern in the event that the options under this subsection (e) are
not fully exercised.
(f) Determination of Fair Market Value. If the Company's Common Stock is
traded on the Nasdaq National or Small Capital Markets or any other national
securities market, the "Fair Market Value" per share shall be the average of
the closing prices over the 20 trading days preceding the date as of which
the Fair Market Value is to be determined. If the Company's Common Stock is
not so traded, then the parties shall attempt to agree on the Fair Market
Value of the Shares. If not agreed to by the parties within 30 calendar days
after a request seeking an agreement as to Fair Market Value, then the
procedures set forth in Section 8(d) shall apply.
(g) Identity of the Proposed Transferee. If the Offering Stockholder has
elected not to identify the Proposed Transferee in the Offer Notice and
wishes to transfer the right to designate a director or directors as
permitted by Section 1(a) of this Agreement relating to the election of
directors of the Company, then the Offering Stockholder shall notify the
other parties to this Agreement of the name of the Proposed Transferee and
the procedures set forth in Sections 8(a) - (c) shall commence again starting
with the delivery of the notice identifying the Proposed Transferee which,
along with the terms set forth in the original Offer Notice, as they may be
modified in the notice identifying the Proposed Transferee, shall be deemed
to constitute a new Offer Notice.
(h) Rights under Principal Stockholders' Agreement. Northeast Utilities
("NU"), the parent of M1, is a party to that certain FiveCom, Inc. Principal
Stockholders Agreement, dated May 28, 1998 (the "NU/CMP Agreement") with
Central Maine Power Company ("CMP"). As long as the NU/CMP Agreement remains
in effect, the terms of this Section 8(h) shall apply.
(i) The Company hereby agrees that, in the event that the Company
is entitled to purchase shares of the Common Stock of the Company held by
CMP, Mainecom Services or any other Affiliate of CMP (the "CMP Shares")
pursuant to Article 2 of the NU/CMP Agreement, the Company will forward to
the Stockholders a copy of any notice received by the Company under Section
2.1(a) or 2.1 (b) of the NU/CMP Agreement, herein referred to as a "CMP Offer
Notice") within five Business Days of receiving such notice. Except for the
price for the CMP Shares, which shall be as set forth in the CMP Offer
Notice, and except as otherwise set forth below, the procedures set forth in
Section 8(b) and Section 8(c) of this Agreement shall then apply as if the
Company were the Offering Stockholder and the CMP Shares were the Offered
Securities. The Company shall purchase such number of CMP Shares as have
been subscribed for by a Notice(s) of Acceptance from one or more Offeree
Stockholders which are able to consummate their respective purchases within
the Closing Period, which, for purposes of this Section 8(h)(i) shall be
deemed to end no later than 30 calendar days after delivery of the CMP Offer
Notice to the Company (up to the total number of CMP Shares offered to the
Company in the CMP Offer Notice). If the Company's entitlement to purchase
the CMP Shares arises pursuant to Section 2.1(b) of the NU/CMP Agreement, the
Closing Period may be extended for a period of 120 calendar days after the
date on which CMP or the Company makes a request for an agreement as to Fair
Market Value, as provided in Section 2.1(c) of the NU/CMP Agreement, and the
Offeree Stockholders who have agreed to purchase CMP Shares hereby agree to
pay the Fair Market Value negotiated by the Company in accordance with the
provisions of Section 2.1(c) of the NU/CMP Agreement. Notwithstanding
anything in Section 8(c) of this Agreement to the contrary, the Offeree
Stockholders who have agreed to purchase CMP Shares will deposit the purchase
price for their portion of the CMP Shares with the Company on or prior to the
last day of the Closing Period, and the Company will deliver to each Offeree
Stockholder the number of CMP Shares subscribed to by such Offeree
Stockholder promptly upon delivery of such shares to the Company. Any
Offeree Stockholder who fails to deposit the purchase price for its portion
of the CMP Shares on or prior to the last day of the Closing Period shall be
deemed to have withdrawn its Notice of Acceptance.
(ii) Notwithstanding anything to the contrary contained in this
Agreement, M1 shall satisfy its obligations under Section 8(a) of this
Agreement by sending a copy of the Offer Notice to the Company (the "M1 Offer
Notice", which term shall include any notice received by the Company under
Section 2.1(a) or 2.1(b) of the NU/CMP Agreement). The Company shall
immediately forward a copy of the M1 Offer Notice to the other Stockholders,
and, except as set forth below, the procedures set forth in Section 8(b) and
Section 8(c) of this Agreement shall then apply as if the Company were the
Offering Stockholder. The Company shall purchase such number of Offered
Securities offered to the Company in the M1 Offer Notice as have been
subscribed for by a Notice(s) of Acceptance from one or more Offeree
Stockholders which are able to consummate their respective purchases within
the Closing Period, which, for purposes of this Section 8(h)(ii) shall be
deemed to be no later than 30 calendar days after delivery of the M1 Offer
Notice to the Company, unless the Company is purchasing the Offered
Securities pursuant to Section 2.1(b) of the NU/CMP Agreement in which case
the Closing Period may be extended for a period of 120 calendar days after
the date on which NU or the Company makes a request for an agreement as to
Fair Market Value (as defined in the NU/CMP Agreement), provided, however, NU
hereby agrees that the Fair Market Value shall be determined in accordance
with Section 8(f) of this Agreement and not the NU/CMP Agreement.
Notwithstanding anything in Section 8(c) of this Agreement to the contrary,
the Offeree Stockholders who have agreed to purchase Offered Securities under
this Section 8(h)(ii) will deposit the purchase price for their portion of
the Offered Securities with the Company on or prior to the last day of the
Closing Period, and the Company will deliver to each Offeree Stockholder the
number of Offered Securities subscribed to by such Offeree Stockholder
promptly upon delivery of such shares to the Company. Any Offeree Stockholder
who fails to deposit the purchase price for its portion of the Offered
Securities set forth in the M1 Offer Notice on or prior to the last day of
the Closing Period shall be deemed to have withdrawn its Notice of
Acceptance.
(iii) NU agrees that it will enforce the obligation of CMP under the
NU/CMP Agreement to offer the CMP Shares to the Company pursuant to the terms
of Article 2 of the NU/CMP Agreement.
9. General.
(a) Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(b) Specific Performance. In addition to any and all other remedies that
may be available at law in the event of any breach of this Agreement, each
Stockholder shall be entitled to specific performance of the agreements and
obligations of the other Stockholders hereunder and to such other injunctive
or other equitable relief as may be granted by a court of competent
jurisdiction.
(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware (without reference
to the conflicts of law provisions thereof).
(d) 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 M1:
Mode 1 Communications, Inc.
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Exelon:
Exelon Ventures Corp.
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▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
PECO Law Department
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
if to CEC:
Consolidated Edison Communications, Inc.
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Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Consolidated Edison, Inc.
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Senior Vice President and General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company:
NorthEast Optic Network, Inc.
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Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(e) Complete Agreement; Amendments. This Agreement constitutes the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof, and supersedes all prior agreements and understandings
relating to such subject matter. No amendment, modification or termination
of, or waiver under, any provision of this Agreement shall be valid unless in
writing and signed by all Stockholders (and, with respect to Section 8(h),
the Company and NU).
(f) Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural,
and vice versa.
(g) Counterparts; Facsimile Signatures. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original,
and all of which together shall constitute one and the same document. This
Agreement may be executed by facsimile signatures.
(h) Section Headings. The section headings are for the convenience of the
parties and in no way alter, modify, amend, limit or restrict the contractual
obligations of the parties.
(i) Assignment; Transfers of Shares; No Third Party Beneficiaries;
Successors and Assigns.
1. No Stockholder hereunder shall assign its rights or obligations
under this Agreement to any third person or entity (except to an Affiliate of
such Stockholder), unless and until (a) such Stockholder shall have complied
with Section 8 hereof and (b) such Stockholder shall have transferred to such
assignee an amount of Shares (i) which constitutes at least the Minimum
Percentage and (ii) such that, after giving effect to such transfer, the
Stockholder no longer holds any Shares, provided that such transferee shall
have agreed to be bound by the terms of this Agreement.
2. The Company shall not effect any transfer of Shares in connection
with any transfer or assignment not in compliance with the terms of this
Agreement.
3. Nothing in this Agreement is intended to confer upon any other person
not party to this Agreement any rights or remedies hereunder.
4. The terms of his Agreement shall be binding upon the parties hereto
and their respective successors and assigns.
(j) Effectiveness. This Agreement shall become binding upon each party upon
execution of this Agreement by such party. No party shall have the right to
exercise its rights under this Agreement until it has executed this
Agreement.
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IN WITNESS WHEREOF, the parties have caused this Stockholders' Agreement to
be executed by their duly authorized officers as of the day and year first
above written.
MODE 1 COMMUNICATIONS, INC.
By:___________________________________
Name:
Title:
EXELON VENTURES CORP.
By:___________________________________
Name:
Title:
CONSOLIDATESD EDISON
COMMUNICATIONS, INC.
By:___________________________________
Name:
Title:
NEON COMMUNICATIONS, INC.
By:___________________________________
Name:
Title:
Northeast Utilities executes this Agreement for the sole purpose of
being bound by its obligations under Section 8(h) hereof.
NORTHEAST UTILITIES
By:___________________________________
Name:
Title:
Schedule 1
Mode 1 Communications, Inc. _________ Shares
Exelon Ventures Corp. _______Shares
Consolidated Edison
Communications, Inc. ________ Shares