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EXHIBIT 10.4
CONTRIBUTION AGREEMENT
DATED
NOVEMBER 4, 1999
BY AND AMONG
PATHNET TELECOMMUNICATIONS, INC.,
PATHNET, INC.
AND
THE PREFERRED STOCKHOLDERS OF PATHNET, INC.
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CONTRIBUTION AGREEMENT
THIS AGREEMENT is made as of November 4, 1999 (the "Agreement Date"),
by and among PATHNET TELECOMMUNICATIONS, INC., a Delaware corporation (the
"Company"); PATHNET, INC., a Delaware corporation ("Pathnet"); SPECTRUM EQUITY
INVESTORS, L.P., NEW ENTERPRISE ASSOCIATES VI, LIMITED PARTNERSHIP, ONSET
ENTERPRISE ASSOCIATES II, L.P., MONTAUK PARTNERS, L.P., XXXX CAPITAL PARTNERS V,
L.P., XXXX CAPITAL PARTNERS (DOMESTIC ANNEX FUND) L.P., XXXX CAPITAL PARTNERS V
INTERNATIONAL, L.P., XXXX CAPITAL PARTNERS VI, L.P., PCP ASSOCIATES, L.P.,
XXXXXX XXXXXXXXX, XXXXXX X. XXXXXXX, the Holders of Series A Preferred Stock of
Pathnet, Inc. (the "A Preferred Stockholders"); SPECTRUM EQUITY INVESTORS, L.P.,
NEW ENTERPRISE ASSOCIATES VI, LIMITED PARTNERSHIP, ONSET ENTERPRISE ASSOCIATES
II, L.P., XXXX CAPITAL PARTNERS V, L.P., XXXX CAPITAL PARTNERS (DOMESTIC ANNEX
FUND) L.P., XXXX CAPITAL PARTNERS V INTERNATIONAL, L.P., XXXX CAPITAL PARTNERS
VI, L.P., PCP ASSOCIATES, L.P., XXXXXX XXXXXXXXX, XXXXXX X. XXXXXXX, TORONTO
DOMINION CAPITAL (U.S.A.), INC., GROTECH PARTNERS IV, L.P., UTECH CLIMATE
CHALLENGE FUND, L.P., the Holders of Series B Preferred Stock of Pathnet, Inc.
(the "B Preferred Stockholders"); SPECTRUM EQUITY INVESTORS, L.P., SPECTRUM
EQUITY INVESTORS II, L.P., NEW ENTERPRISE ASSOCIATES VI, LIMITED PARTNERSHIP,
XXXXX X. COLO, XXXXXXXX X. XXXXXXXX, XXXXXXX X. XXXXXXXXX, XXXXXXX X. XXXXXXX,
XXXXXX X. XXXXXXXXX, XXXX XXXX, TORONTO DOMINION CAPITAL (U.S.A.), INC., GROTECH
PARTNERS IV, L.P., UTECH CLIMATE CHALLENGE FUND, L.P., UTILITY COMPETITIVE
ADVANTAGE FUND, FBR TECHNOLOGY VENTURE PARTNERS L.P., ONSET ENTERPRISE
ASSOCIATES II, L.P., ONSET ENTERPRISE ASSOCIATES III, L.P., XXXXXX X. XXXXXXX,
XXXX CAPITAL PARTNERS V, L.P., XXXX CAPITAL PARTNERS (DOMESTIC ANNEX FUND) L.P.,
XXXX CAPITAL PARTNERS V INTERNATIONAL, L.P., XXXX CAPITAL PARTNERS VI, L.P., and
PCP ASSOCIATES, L.P, the Holders of Series C Preferred Stock of Pathnet, Inc.
(the "C Preferred Stockholders" and, together with the A Preferred Stockholders
and the B Preferred Stockholders, the "Stockholders");
W I T N E S S E T H:
WHEREAS, the Stockholders own shares of preferred stock of
Pathnet; and
WHEREAS, the Company intends to acquire Pathnet as a
subsidiary; and
WHEREAS, the Stockholders intend, subject to the terms and conditions
hereof, to exchange their stock in Pathnet for Shares of the Company; and
WHEREAS, the Stockholders and persons contributing common stock of
Pathnet or other assets to the Company pursuant to the Related Contribution
Agreements (as defined below) intend that the transfers of the stock and other
property interests to the Company in exchange for shares of the Company will
assist the Company and its subsidiaries in conducting future operations in an
efficient manner; and
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NOW THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
Section 1 Definitions. For the purposes of this
Agreement, the following terms have the meanings set forth below:
"12 1/4% Senior Notes" shall mean those certain senior notes
due 2008 issued by Pathnet pursuant to the terms of the 1998 Indenture.
"1998 Indenture" shall mean that certain Indenture, dated as of April
8, 1998, by Pathnet to the Bank of New York, as Trustee, in respect of
$350,000,000 in aggregate principal amount of 12 1/4% Senior Notes.
"A Preferred Stockholders" shall have the meaning set forth in the
preamble to this Agreement.
"Affiliate" of any particular person or entity shall mean any other
person or entity controlling, controlled by or under common control with such
particular person or entity. The term "control" for this purpose shall mean the
ability, whether by the ownership of shares or other equity interest, by
contract or otherwise, to elect a majority of the directors of a corporation,
independently to select the managing partner of a partnership or the managing
member of a limited liability company, or otherwise to have the power
independently to remove and then select a majority of those Persons exercising
governing authority over an entity. Control shall be exclusively presumed in the
case of the direct or indirect ownership of fifty percent (50%) or more of the
equity interests in an entity.
"Agreement" shall mean this Contribution Agreement, as amended,
supplemented or restated from time to time in accordance with its terms.
"Agreement Date" shall have the meaning set forth in the preamble to
this Agreement.
"B Preferred Stockholders" shall have the meaning set forth in the
preamble to this Agreement.
"C Preferred Stockholders" shall have the meaning set forth in the
preamble to this Agreement.
"Closing" shall have the meaning set forth in Section 6A.
"Closing Date" shall have the meaning set forth in Section 6A.
"Common Stock" shall mean Common Stock of the Company, par value $0.01
per share.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Contributors" shall mean the parties to this Agreement and the Related
Contribution Agreements (as defined below), other than the Company and Pathnet.
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"FCC" shall mean the Federal Communications Commission and any
governmental body or agency succeeding to the functions thereof.
"FCC Consents" shall mean the consents of the FCC, to the extent
required under the Federal Communications Act and the regulations thereunder in
order to effect the transactions contemplated by this Agreement and the Related
Contribution Agreements, to the assignment or transfer of control of all FCC
licenses and authorizations of the Company and the Subsidiaries, or, in lieu
thereof, special temporary authority to operate under such licenses and
authorizations following such assignment or transfer of control; exclusive,
however, of any FCC licenses or authorizations that may be surrendered or
forfeited to the FCC and that are not material to the operation of Pathnet's
existing networks.
"Governing Documents" shall mean, with respect to (i) a limited
partnership, such limited partnership's certificate of limited partnership and
the agreement of limited partnership, and any amendments or modifications of any
of the foregoing; (ii) a corporation, such corporation's articles or certificate
of incorporation, by-laws and any applicable authorizing resolutions, and any
amendments or modifications of any of the foregoing; (iii) a limited liability
company, such limited liability company's articles or certificate of
organization or formation and operating agreement or agreement of limited
liability company, and any amendments or modifications of any of the foregoing;
and (iv) a trust, such trust's declaration of trust, articles supplementary and
by-laws and any amendments or modifications of any of the foregoing.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"Licenses" shall mean federal, state, local and foreign franchises,
tariffs, licenses, ordinances, certifications, approvals, authorizations and
permits issued or granted by governmental authorities.
"Loss" or "Losses" shall mean any and all loss, cost, claim, damage,
liability, or expense (including attorneys' fees).
"Material Adverse Effect" shall mean a material adverse effect upon the
assets, liabilities, prospects, financial condition or business operations of
the Company and its Subsidiaries, taken as a whole.
"Pathnet" shall have the meaning set forth in the preamble
to this Agreement.
"Person" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, a limited liability company and a governmental entity or any
department, agency or political subdivision thereof.
"Qualified Public Offering" shall mean the closing of the first firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities
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Act covering the offer and sale of Common Stock to the public (i) in which the
proceeds received by the Company, net of underwriting discounts and commissions,
equal or exceed $75,000,000; (ii) immediately prior to the consummation of which
the Company is valued (based on the per-share price paid in such public
offering, but without regard to any proceeds to be received by the Company in
connection with such public offering) at greater than $600,000,000; and (iii) in
which the Company uses a nationally recognized underwriter acceptable to the
Board of Directors.
"Related Contribution Agreements" shall have the meaning set forth in
Section 3A(v).
"SEC" shall mean the Securities and Exchange Commission and any
governmental body or agency succeeding to the functions thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal law then in force.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"Senior Noteholder Consent" shall mean each and all consents, waivers,
amendments and other action of the holders of the 12 1/4% Senior Notes of
Pathnet in respect of the transactions contemplated herein (and in the Related
Contribution Agreements, all to be closed in connection herewith) that are, in
the reasonable opinion of the Company and its counsel, to have been obtained or
completed to permit Pathnet to complete such transactions pursuant to the terms
of the 1998 Indenture.
"Senior Noteholder Consent Date" shall mean that date on which the
Senior Noteholder Consent shall have been obtained.
"Shares" shall mean the Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, and Series C Convertible Preferred Stock of the
Company being issued to the A Preferred Stockholders, the B Preferred
Stockholders, and the C Preferred Stockholders, respectively, pursuant to the
terms hereof, as the terms of such Shares are set forth in the Certificate of
Incorporation of the Company attached as Exhibit D hereto.
"Stockholders" shall have the meaning set forth in the preamble to this
Agreement.
"Stockholders Agreement" shall mean a Stockholders' Agreement
substantially in the form of Exhibit E hereto.
"Subsidiary" shall mean Pathnet and (i) any other corporation of which
the securities having a majority of the ordinary voting power in electing the
board of directors are, at the time as of which any determination is being made,
owned by the Company either directly or through one or more Subsidiaries, (ii)
any partnership, joint venture or similar entity of which or in which such
Person, such Person and one or more of its Subsidiaries, or one or more
Subsidiaries of such Person directly or indirectly own more than 50% of the
capital interest or profits interest, or (iii) any trust, association or other
unincorporated organization of which or in which such Person,
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such Person and one or more of its Subsidiaries, or one or more Subsidiaries of
such Person directly or indirectly own more than 50% of the beneficial interest.
"Treasury Regulations" shall mean the United States Treasury
Regulations promulgated under the IRC, and any reference to any particular
Treasury Regulation section shall be interpreted to include any final or
temporary revision of or successor to that section regardless of how numbered or
classified.
Section 2 Contributions by Stockholders in Exchange
for Shares.
At the Closing, each Stockholder shall assign, transfer, convey and
contribute to the Company each of the Stockholder's stock and interest in
Pathnet and in consideration for the stock of Pathnet, the Company shall issue
and sell to each Stockholder Shares, all in the amounts set forth in the
schedule attached as Exhibit A hereto. Each Stockholder shall receive solely
Shares in exchange for such Stockholder's stock and interest in Pathnet.
Section 3 Conditions to Closing.
3A. Conditions Precedent of the Company at the Closing. The
Company's obligations under this Agreement to issue the Shares and otherwise
consummate the transactions contemplated herein in respect of the Closing are
subject to the satisfaction (or waiver in writing by the Company) of the
following conditions on or before the Closing Date:
i. No Injunction. No temporary restraining order or preliminary
or permanent injunction of any court or administrative agency of
competent jurisdiction prohibiting the consummation of the transactions
contemplated herein shall be in effect or pending.
ii. Governmental Consents. The Company and the other parties to
this Agreement and the Related Contribution Agreements shall have made
all filings required under the HSR Act for the transactions
contemplated hereby and the applicable waiting period under the HSR Act
shall have elapsed without any second request by the Department of
Justice or Federal Trade Commission with respect to such filings. The
Company shall have obtained all FCC Consents.
iii. Accuracy of the Representations and Warranties. The
representations and warranties of the Stockholders contained in this
Agreement shall be true and correct in all material respects on the
date hereof and, except for representations and warranties made with
respect to a specified date, at and as of the Closing Date.
iv. Performance of Agreement. Each Stockholder shall have
performed or complied with, in all material respects, all of its
respective agreements, covenants and obligations required by this
Agreement to be performed or complied with by such Stockholder prior to
or at the Closing, including, without limitation, delivery of the
contribution described in Section 2.
v. Contributions of Other Parties. At or contemporaneously with
the Closing, the Company shall also be closing, as part of the same
overall plan of contribution, upon (a) one or more contribution
agreements between the Company, Pathnet and certain holders
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of shares of the outstanding common stock of Pathnet, (b) the
Contribution Agreement between the Company, Pathnet and Colonial
Pipeline Company, (c) the Contribution Agreement between the Company,
Pathnet and The Burlington Northern and Santa Fe Railroad, and (d) the
Contribution Agreement between the Company, Pathnet and CSX
Transportation, Inc. (the "Related Contribution Agreements"), such that
immediately after the Closing, the Company will own stock of Pathnet
constituting control within the meaning of IRC Section 368(c).
vi. Senior Noteholder Consent. The Senior Noteholder Consent shall
have been obtained and not revoked.
vii. Delivery of Closing Documents. The Company shall have received
the other closing documents specified in Section 6C.
3B. Conditions Precedent of the Stockholders at the Closing.
The Stockholders' obligations under this Agreement to deliver the contributions
described in Section 2 and otherwise consummate the transactions contemplated
herein in respect of the Closing are subject to the satisfaction (or waiver in
writing by each Stockholder) of the following conditions on or before the
Closing Date:
i. No Injunction. No temporary restraining order or preliminary
or permanent injunction of any court or administrative agency of
competent jurisdiction prohibiting the consummation of the transactions
contemplated herein shall be in effect or pending.
ii. Governmental Consents. The Company and the other parties to
this Agreement and the Related Contribution Agreements shall have made
all filings required under the HSR Act for the transactions
contemplated hereby, and the applicable waiting period under the HSR
Act shall have elapsed without any second request by the Department of
Justice or Federal Trade Commission with respect to such filings. The
Company shall have obtained all FCC Consents.
iii. Accuracy of the Representations and Warranties. The
representations and warranties of the Company and Pathnet contained in
this Agreement shall be true and correct in all material respects on
the date hereof and, except for representations and warranties made
with respect to a specified date, at and as of the Closing Date.
iv. Performance of Agreement. Each of the Company and Pathnet
shall have performed or complied with, in all material respects, all of
its respective agreements, covenants and obligations required by this
Agreement to be performed or complied with by it prior to or at the
Closing, including, without limitation, issuance of the Shares by the
Company described in Section 2.
v. Contributions of Other Parties. At or contemporaneously with
the Closing, as part of the same overall plan of contribution, the
Company shall also be closing upon the Related Contribution Agreements,
such that immediately after the Closing, the Company will own stock of
Pathnet constituting control within the meaning of IRC Section 368(c).
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vi. Material Adverse Change. Between the Agreement Date and the
Closing there shall not have occurred any event or series of related
events which, individually or in the aggregate, have caused or could
reasonably be anticipated to cause a Material Adverse Effect.
vii. Delivery of Closing Documents. The Stockholders shall have
received the closing documents specified in Section 6B.
viii. Senior Noteholder Consent. The Senior Noteholder Consent shall
have been obtained and not revoked.
Section 4 Representations and Warranties of the
Company and Pathnet. Each of the Company and Pathnet represents and warrants to
the Stockholders with respect to each of the following provisions of this
Section 4 at and as of the Agreement Date and (except for those made with
reference to a specific date) again at and as of the Closing Date:
4A. Organization and Corporate Power. The Company is duly
organized, validly existing and in good standing under the laws of Delaware and
is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify. The Company has all
requisite corporate power and authority and all material Licenses necessary to
own and operate its properties, to carry on its business as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the Company's Governing Documents
which have been furnished to the Stockholders reflect all amendments made
thereto at any time prior to the Agreement Date and are correct and complete.
4B. Authorization. Each of the Company and Pathnet has all
necessary corporate power and has been duly authorized by all necessary and
appropriate action to enter into this Agreement and to consummate the
transactions contemplated herein. The officers of the Company and Pathnet
executing this Agreement on behalf of such corporations have been duly
authorized by all necessary and appropriate corporate action. This Agreement is
a valid and binding obligation of each of the Company and Pathnet, enforceable
against it in accordance with its terms, except insofar as enforceability may be
affected by bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by general principles of equity.
4C. Capital Stock and Related Matters.
i. As of the Agreement Date, no shares of capital stock of the
Company are issued and outstanding.
ii. As of the Agreement Date, the authorized capital stock of
Pathnet consists of (a) 10,000,000 shares of preferred stock (of which
zero (0) shares are issued and outstanding); (b) 1,000,000 shares of
Series A Convertible Preferred Stock (all of which are issued and
outstanding); (c) 1,651,046 shares of Series B Convertible Preferred
Stock (all of which are issued and outstanding); (d) 2,819,549 shares
of Series C Convertible Preferred Stock (all of which are issued and
outstanding); and (e) 60,000,000 shares of Common Stock (of which
2,977,593 are issued and outstanding).
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iii. As of the Closing and immediately thereafter (assuming that
the Company has completed the closing under each of the Related
Contribution Agreements and under similar contribution agreements with
all holders of the stock of Pathnet) the authorized capital stock of
the Company will consist of (a) 39,620,860 shares of preferred stock,
of which 2,899,999 shares are designated as Series A Convertible
Preferred Stock (all of which will be issued and outstanding),
4,788,030 shares are designated as Series B Convertible Preferred Stock
(all of which will be issued and outstanding), 8,176,686 shares are
designated as Series C Convertible Preferred Stock (all of which will
be issued and outstanding), 9,250,000 shares will be designated as
Series D Convertible Preferred Stock (of which 8,511,607 will be issued
and outstanding, allocated among the holders thereof as set forth on
Exhibit H), and 4,506,145 shares of Series E Convertible Preferred
Stock (of which 1,729,631 will be issued and outstanding)
(collectively, the "Preferred Stock"), and (b) 60,000,000 shares of
Common Stock, of which 2,977,593 shares will be issued and outstanding
and 30,000,000 shares will be reserved for issuance upon conversion of
the Preferred Stock. As of the Closing, neither the Company nor any
Subsidiary will have outstanding any stock or securities convertible or
exchangeable for any shares of its capital stock or containing any
profit participation features, nor shall it have outstanding any rights
or options to subscribe for or to purchase its capital stock or any
stock or securities convertible into or exchangeable for its capital
stock or any stock appreciation rights or phantom stock plans, except
for the Preferred Stock and except as set forth on Exhibit H. Exhibit H
accurately sets forth the following with respect to all outstanding
options and rights to acquire the Company's and Pathnet's capital
stock: the holder, the number of shares covered, the exercise price and
the expiration date. As of the Closing, neither the Company nor any
Subsidiary will be subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares of its capital
stock or any warrants, options or other rights to acquire its capital
stock, except as set forth on Exhibit H. As of the Closing and
immediately thereafter, all of the outstanding shares of the Company's
capital stock shall be validly issued, fully paid and nonassessable.
iv. The Company has not violated any applicable federal or state
securities laws in connection with the offer, sale or issuance of any
of its capital stock, including the sale of the Shares pursuant to this
Agreement. There are no agreements between the Company's stockholders
or between Pathnet's stockholders with respect to the voting or
transfer of the Company's or Pathnet's capital stock or with respect to
any other aspect of the Company's or Pathnet's affairs, except as set
forth on Exhibit H.
4D. Subsidiaries, Investments. Exhibit H correctly sets forth
the name of each Subsidiary, the jurisdiction of its incorporation and
the Persons owning the outstanding capital stock of such Subsidiary.
Each Subsidiary is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has
all requisite corporate power and authority and all material Licenses
necessary to own its properties and to carry on its businesses as now
being conducted and as presently proposed to be conducted, and is
qualified to do business in every jurisdiction in which its ownership
of property or the conduct of business requires it to qualify, except
for any jurisdiction with respect to which the failure to qualify would
not have a Material Adverse Effect. All of the outstanding shares of
capital stock of each Subsidiary are
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validly issued, fully paid and nonassessable, and all such shares are
owned by the Company or another Subsidiary free and clear of any lien,
charge or encumbrance except as disclosed in Exhibit H. Except as set
forth on Exhibit H, neither the Company nor any Subsidiary owns or
holds the right to acquire any shares of stock or any other security or
interest in any other Person.
4E. No Breach. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
nor the fulfillment of or compliance with the terms and conditions
hereof (a) conflict with or will result in a breach of, default under,
or triggering of any rights against the Company or any Subsidiary under
any terms, conditions or provisions of (i) the Governing Documents of
the Company or any Subsidiary, (ii) the 1998 Indenture, or (iii) any
agreement with shareholders, or any other agreement, contract,
indenture, mortgage, deed, easement, order, judgment, decree,
arbitration award, statute, regulation or instrument to which the
Company or any Subsidiary is a party or by which the assets of the
Company or any Subsidiary are bound, in each case except as to matters
that would not be reasonably expected to have a Material Adverse Effect
or affect the ability of the Company or Pathnet to consummate the
transactions contemplated herein, or (b) constitutes or will constitute
a violation or default under, or create a right to terminate, any of
the foregoing, except as to matters that would not be reasonably
expected to have a Material Adverse Effect or affect the ability of the
Company or Pathnet to consummate the transactions contemplated herein.
Except as set forth in Exhibit I, no consent or approval,
authorization, order, registration or qualification of any governmental
entity or any other Person is required for the execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby by the Company.
4F. Shares. The issuance or delivery of the Shares hereunder
are not subject to any preemptive right of any Person or to any
contractual right of first refusal or other right in favor of any
Person except as set forth in the Stockholders Agreement. Upon delivery
of the contributions described in Section 2 to the Company, the Shares
will be validly issued, fully paid and non-assessable.
4G. Related Contribution Agreements. The Company has made
available to the Stockholders true, correct and complete copies of the Related
Contribution Agreements, together with any amendments thereto and modifications
thereof.
4H. Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement binding
upon the Company or any Subsidiary.
4I. Reports with the SEC. The Company has furnished or made
available to the Stockholders complete and accurate copies of Pathnet's annual
report on Form 10-K for its most recent fiscal year, all other reports or
documents required to be filed by Pathnet pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act since the filing of the most recent annual report on
Form 10-K, and all correspondence with the SEC since August 1998. Such filed
reports do not, as of the date hereof, contain any material false statements or
any misstatement of any material fact and do not omit to state any fact
necessary to make the statements set forth
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therein not misleading. Pathnet has made all filings with the SEC which it is
required to make, and Pathnet has not received any request from the SEC to file
any amendment or supplement to any of the reports described in this Section 4I.
4J. Transfers of Contributed Properties. There is no plan or
intention by the Company to dispose of any of the contributed properties
described in Section 2 or Section 3A(v), except that the Company is
contemplating (i) a transfer of certain contributed properties to Pathnet or
another Subsidiary in a transaction that will qualify as a tax-free transfer
pursuant to IRC Section 351, and (ii) the conversion of certain preferred stock
of Pathnet into common stock of Pathnet.
4K. No Intention to Redeem. There is no current plan or
intention on behalf of the Company to redeem or otherwise reacquire any of the
Shares issued pursuant to the transactions described in Sections 2 and 3A(v)
hereof.
Section 5 Representations and Warranties of the
Stockholders. Each Stockholder individually and severally, but not jointly,
represents and warrants to the Company, to Pathnet and to each of the other
Stockholders with respect to each of the following at and as of the Agreement
Date and (except for those made with reference to a specific date) again at and
as of the Closing Date:
5A. Binding Agreement. Such Stockholder, if a partnership or
a corporation, has all required partnership or corporate power and authority to
enter into and perform this Agreement. Such Stockholder, if an individual, has
the capacity to enter into and perform this Agreement. This Agreement has been
duly executed by such Stockholder and constitutes legal, valid and binding
obligations of such Stockholder, enforceable against it in accordance with its
terms, except insofar as enforceability may be affected by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or by general
principles of equity.
5B. Authorization; No Breach. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby nor the fulfillment of or compliance with the terms and conditions hereof
(a) conflicts with or will result in a breach of any of the terms, conditions or
provisions of (i) the Governing Documents of any Stockholder which is a
partnership or a corporation, (ii) any agreement, contract, indenture, mortgage,
deed, easement, order, judgment, decree, arbitration award, statute, regulation
or instrument to which such Stockholder, whether such Stockholder is a
partnership, a corporation or an individual, is a party or by which it or its
assets are bound, except as to matters that would not reasonably be expected to
have a Material Adverse Effect on such Stockholder or materially affect the
ability of such Stockholder to consummate the transactions contemplated herein
or (b) constitutes or will constitute a violation or default or create a right
of termination under any of the foregoing, except as to matters that would not
reasonably be expected to have a Material Adverse Effect on such Stockholder or
materially affect the ability of such Stockholder to consummate the transactions
contemplated herein. No consent or approval, authorization, order, regulation or
qualification of any governmental entity or any other third party is required
for the execution and delivery by such Stockholder of this Agreement and the
consummation by such Stockholder of the transactions contemplated hereby, other
than any filings required under the HSR Act.
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5C. Investment Representations. Such Stockholder acknowledges
that the Shares have not been and will not be registered or qualified under the
Securities Act or any state securities laws and are offered in reliance upon an
exemption from registration under Regulation D of the Securities Act and similar
state law exceptions. The Shares to be received by such Stockholder hereunder
will be held by such Stockholder for investment purposes only for such
Stockholder's own account, and not with a view to or for sale in connection with
any distribution of the Shares, and such Stockholder acknowledges that the
Shares cannot be sold or otherwise disposed of unless they are subsequently
registered under the Securities Act or pursuant to an exemption therefrom; and
the Shares may not be sold, assigned or otherwise transferred except in
compliance with the Stockholders Agreement. Such Stockholder hereby acknowledges
receipt of a copy of the Stockholders Agreement and represents that it has
reviewed and understands the provisions thereof which have a bearing on the
representations made in this Section 5C.
5D. Accredited Investor. Unless otherwise indicated on
Exhibit B, such Stockholder is an "accredited investor" within the meaning of
Regulation D under the Securities Act and has the knowledge and experience in
financial and business matters such that it is capable of evaluating the merits
and risks of receiving and owning the Shares and is able to bear the economic
risk of such ownership and understands that an investment in Shares involves
substantial risks.
5E. Availability of Information. There has been made
available to such Stockholder and such Stockholder's advisors the opportunity to
ask questions of, and receive answers from, the Company concerning the terms and
conditions of the investment in the Shares, and to obtain the financial
information with respect to the Company's assets, the Stockholders Agreement,
and any additional information, to the extent that the Company possesses such
information or can acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information given to such Stockholder, or to
otherwise make an informed investment decision, that such Stockholder has had an
opportunity to consult with counsel and other advisors about the investment in
the Shares, and that all material document, records and books pertaining to such
investment have, on request, been made available to such Stockholder and his or
its advisors.
5F. No General Solicitation. Neither such Stockholder nor any
advisor to such Stockholder is aware of or has engaged in any form of general
solicitation or advertising with respect to sales of the Shares, including (i)
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio; and
(ii) any seminar or meeting whose attendees were invited by any general
solicitation or general advertising.
5G. Litigation. There is no action, suit, proceeding or
investigation pending or, to such Stockholder's knowledge, threatened against
such Stockholder that questions the validity of this Agreement or the ability of
such Stockholder to consummate the transactions contemplated hereby.
5H. Brokerage. Such Stockholder acknowledges that there are
no claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions
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contemplated by this Agreement based on any arrangement or agreement binding
upon such Stockholder.
5I. No Intention to Transfer Shares. Such Stockholder
acknowledges that there is no intention or plan, formally or informally, on the
date hereof, to transfer any of the Shares received by such Stockholder pursuant
to this Agreement.
Section 6 Closing.
6A. Closing Date. The Company shall notify the Stockholders
of the occurrence of the Senior Noteholder Consent Date within one business day
after such date. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxxxxxxx & Xxxxxxx, in
Washington, D.C., or at such other place as shall be mutually agreed upon by the
parties, on the date which is five (5) business days following the Senior
Noteholder Consent Date (or, in the event that any other conditions to the
obligations of any party to close as provided hereunder shall not have been met
at such date, then on the date which is three (3) business days following the
date on which such conditions shall have been satisfied or waived by the party
whose obligations are so conditioned), or at such other date and time as to
which the parties may agree (the "Closing Date"). The Closing shall be effective
immediately prior to the close of business on the Closing Date.
6B. Deliveries by the Company at the Closing. At the Closing,
the Company and Pathnet shall deliver the following documents:
i. A certificate of the President of each of Pathnet and the
Company, each certifying that its representations and warranties are
true in all material respects as of the Closing Date and that it has
performed or complied, in all material respects, with all of its
respective agreements and obligations required by this Agreement to be
performed or complied with by it prior to or at the Closing;
ii. A certified copy of resolutions of the Board of Directors of
the Company, authorizing the execution and delivery of this Agreement
and the performance of the obligations of the Company hereunder;
iii. A certified copy of resolutions of the Board of Directors of
Pathnet, authorizing the execution and delivery of this Agreement and
the performance of the obligations of Pathnet hereunder;
iv. An opinion of Counsel to the Company substantially in the form
set forth on Exhibit G;
v. The Stockholders Agreement duly executed and delivered by the
Company and each other stockholder of the Company (other than any one
or more stockholders beneficially owning, in the aggregate, not more
than one percent of the outstanding capital stock of the Company);
vi. Certificates representing the Shares to be issued to each
Stockholder;
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vii. All third party and governmental consents necessary or
appropriate to consummate the transactions contemplated herein,
including, without limitation, the FCC Consents; and
viii. Those other closing documents required to be executed by it or
as may otherwise be reasonably necessary or appropriate to consummate
the transactions contemplated herein.
6C. Deliveries by each Stockholder at the Closing. At the
Closing, each Stockholder shall deliver the following documents:
i. The Stockholders Agreement duly executed and delivered by such
Stockholder;
ii. A certificate of such Stockholder certifying that the
representations and warranties of such Stockholder contained in this
Agreement are true and correct as of the Closing Date and that it has
performed, in all material respects, all of its respective agreements
and obligations required by this Agreement to be performed or complied
with by such Stockholder prior to or at the Closing;
iii. All third party and governmental consents necessary or
appropriate to consummate the transactions contemplated herein;
iv. If such Stockholder is a corporation, a certified copy of
resolutions of the Board of Directors of such corporation authorizing
the execution and delivery by such corporation of this Agreement and
the performance of the obligations by such corporation hereunder; and
v. Those other closing documents required to be executed by it or
as may otherwise be reasonably necessary or appropriate to consummate
the transactions contemplated herein.
Section 7 Covenants.
7A. Implementing Agreement. Subject to the terms and
conditions hereof, each party hereto shall use its best efforts to take all
action required of it to fulfill its obligations under the terms of this
Agreement and to facilitate the consummation of the transactions contemplated
hereby.
7B. HSR Act Filings. Each of the Company, Pathnet and each
Stockholder shall use reasonable efforts to prepare and, as soon as practicable
after the Agreement Date, file with the Federal Trade Commission and the
Antitrust Division of the Department of Justice any materials and information
required to be filed with or provided pursuant to the HSR Act with respect to
the transactions contemplated by this Agreement. Each of the Company, Pathnet
and such Stockholders shall promptly supply any additional information which may
be required or requested of it in connection with the HSR Act filings.
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7C. FCC Filings. Each of the Company and Pathnet shall use
reasonable best efforts to prepare and, as soon as practicable after the
Agreement Date, file with the Federal Communications Commission any applications
necessary to obtain the FCC Consents.
7D. Consents and Approvals. The Company and Pathnet shall use
their best efforts to obtain all consents, approvals, certificates and other
documents required in connection with its performance under this Agreement and
the consummation of the transactions contemplated hereby. The Company and
Pathnet shall make all filings, applications, statements and reports to all
governmental authorities and other Persons which are required to be made by
either of them prior to the Closing Date by or on behalf of the Company or
Pathnet or any of their Affiliates pursuant to any applicable law or contract in
connection with this Agreement and the transactions contemplated hereby.
7E. Tax Free Transfers. The parties intend that the
contribution of properties by the Stockholders and the other contributing
Persons described in Section 3A(v) in respect of the Closing will be part of a
single integrated transaction in which no gain or loss will be recognized to the
Company or the Stockholders upon the issuance and receipt of the Shares pursuant
to IRC Section 351 and, in the case of Persons who contribute Pathnet stock to
the Company, the contributions will qualify as a tax-free reorganization
pursuant to IRC Section 368(a)(1)(B), and the parties agree that they will
prepare and file their Federal and state income tax returns in a manner
consistent with such characterization. Further, each Stockholder agrees to
provide to the Company a statement setting forth the amount of such
Stockholder's tax basis in the property contributed by such Stockholder so that
the Company can determine its tax basis in the property in accordance with IRC
Section 362. Each Stockholder agrees to file the information required by
Treasury Regulation Section 1.351-3 for its Federal income tax return for the
taxable year of the contribution, and the Company agrees to furnish to each
Stockholder information necessary to enable each Stockholder to comply with the
information reporting requirements of Treasury Regulation Section 1.351-3. The
Company agrees that it will exercise reasonable care not to take any action that
would cause the transactions contemplated hereby not to qualify as tax-free
pursuant to IRC Section 351. The Company has no present intention or plan to
transfer all or substantially all (within the meaning of IRC Section
368(a)(1)(C)) of the assets of Pathnet to the Company. The Company has no
present intention or plan to issue additional shares of the Company (other than
the shares proposed to be issued in the transactions contemplated by Sections 2
and 3A(v) hereof), or rights to acquire additional shares, for consideration
other than cash or property, if the result would be that the Contributors would
fail to have "control" of the Company within the meaning of IRC Section 368(c).
7F. Conversion. On the Closing Date, each Stockholder shall,
except to the extent directed by the Company in writing at least five business
days prior to the Closing Date, provide notice pursuant to Article 5.3.4(j) of
the Pathnet Certificate of Incorporation of exercise of the right to convert the
preferred stock of Pathnet into common stock of Pathnet. The notice provided by
each Stockholder shall be subject to each of the Closing Conditions set forth in
Section 3B of this Agreement, and shall be null and void in the event that any
condition set forth in such section is not satisfied. Pursuant to Article
5.3.4(j) of the Pathnet Articles of Incorporation, the conversion will be
effective immediately prior to the close of business on the Closing Date.
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Miscellaneous.
8A. Complete Agreement. This Agreement (including the
Exhibits hereto) represents the entire agreement between the Stockholders,
Pathnet and the Company covering everything agreed upon or understood in this
transaction and all other prior agreements, written or oral are merged into this
Agreement. There are no oral promises, conditions, representations,
understandings, interpretations or terms of any kind as conditions or
inducements to the execution hereof in effect between the parties.
8B. Authorized Signatories. The persons executing this
Agreement for and on behalf of each Stockholder, Pathnet and the Company each
represent that they have the requisite authority to bind the entities on whose
behalf they are signing.
8C. Termination. In the event that for any reason the Closing
does not occur on or before the 150th day after the date of this Agreement, then
any party, if not then in breach of its obligations under this Agreement, may
terminate this Agreement by giving written notice thereof to the other party;
provided, however, that no such termination shall relieve either party of
liability for any breach of its obligations hereunder prior to such termination.
8D. Survival of Representations and Warranties. Regardless of
any investigation made by any party or on its behalf, all representations and
warranties contained herein or made in writing by any party in connection
herewith shall terminate at the Closing.
8E. Successors and Assigns. This Agreement may not be
assigned by either party without the written consent of the other party. Except
as otherwise expressly provided herein, all covenants and agreements contained
in this Agreement by or on behalf of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
8F. Knowledge. As used in this Agreement, the terms
"knowledge" or "aware" with respect to the Company and Pathnet shall mean the
actual knowledge or awareness of any one or more of Xxxxxxx Xxxxxx, Xxxxxxx
Xxxxxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxxx, Xxx Xxxxxxxxxxxxx and Xxxxxx Xxxxx.
8G. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
8H. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
8I. Descriptive Headings: Interpretation. The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a Section of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
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8J. Governing Law. This Agreement shall be governed by the
laws of the State of Delaware.
8K. Amendment. No change or addition shall be made to this
Agreement except by a written agreement executed by the Stockholders, Pathnet
and the Company.
8L. Expenses. The Company, Pathnet and each Stockholder shall
pay their respective expenses, if any, incurred in connection with the exchange
pursuant to this Agreement.
8M. Notices. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable express courier
service (charges prepaid) or mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid. Such notices, demands and
other communications shall be sent to the parties hereto at the address
indicated below:
If to the Stockholder to such Stockholder's address as set forth in Exhibit B
hereto.
If to the Company to:
Pathnet Telecommunications, Inc.
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: General Counsel
Fax: 000-000-0000
With a copy (which shall not constitute notice) to:
Xxxxxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxx., X.X.
X.X. Xxx 0000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Fax: 000-000-0000
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
[End of text; signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
-17-
19
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
PATHNET, INC.
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
STOCKHOLDERS
SPECTRUM EQUITY INVESTORS, L.P.
By: /s/ XXXXX XXXXXX
---------------------------------
Name: Xxxxx Xxxxxx
Title: Illegible
SPECTRUM EQUITY INVESTORS II, L.P.
By: /s/ XXXXX XXXXXX
---------------------------------
Name: Xxxxx Xxxxxx
Title: Illegible
/s/ XXXXX X. COLO
-------------------------------------
Xxxxx X. Colo
/s/ XXXXXXXX X. XXXXXXXX
-------------------------------------
Xxxxxxxx X. Xxxxxxxx
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/s/ XXXXXXX X. XXXXXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxxxxx
/s/ XXXXXXX X. XXXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ XXXXXX X. XXXXXXXXX
-------------------------------------
Xxxxxx X. Xxxxxxxxx
/s/ XXXX XXXX
-------------------------------------
Xxxx Xxxx
NEW ENTERPRISE ASSOCIATES VI,
LIMITED PARTNERSHIP
By: /s/ XXXXX X. XXXXXX
----------------------------------
Name: Xxxxx X. Xxxxxx
Title: Managing General Partner
ONSET ENTERPRISE ASSOCIATES II, L.P.
By: /s/ XXXXX X. OPDENZYK
----------------------------------
Name: Xxxxx X. Opdenzyk
Title: General Partner
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ONSET ENTERPRISES ASSOCIATES III, L.P.
By: /s/ XXXXX X. OPDENZYK
---------------------------------
Name: Xxxxx X. Opdenzyk
Title: General Partner
MONTAUK PARTNERS, L.P.
By: /s/ XXXXX X. XXXXX
---------------------------------
Name: Xxxxx X. Xxxxx
Title: General Partner,
Managing Member
XXXX CAPITAL PARTNERS V, L.P.
By: /s/ XXXXX X. XXXX
---------------------------------
Name: Xxxxx X. Xxxx
Title: Managing Member and
General Partner
XXXX CAPITAL PARTNERS V (DOMESTIC
ANNEX FUND), L.P.
By: /s/ XXXXX X. XXXX
---------------------------------
Name: Xxxxx X. Xxxx
Title: Managing Member and
General Partner
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XXXX CAPITAL PARTNERS V
INTERNATIONAL, L.P.
By: /s/ XXXXX X. XXXX
---------------------------------
Name: Xxxxx X. Xxxx
Title: Managing Member and
General Partner
XXXX CAPITAL PARTNERS VI, L.P.
By: /s/ XXXXX X. XXXX
---------------------------------
Name: Xxxxx X. Xxxx
Title: Managing Member and
General Partner
PCP ASSOCIATES, L.P.
By: /s/ XXXXX X. XXXX
---------------------------------
Name: Xxxxx X. Xxxx
Title: Managing Member and
General Partner
/s/ XXXXXX XXXXXXXXX
-------------------------------------
Xxxxxx Xxxxxxxxx
/s/ XXXXXX X. XXXXXXX
-------------------------------------
Xxxxxx X. Xxxxxxx
TORONTO DOMINION CAPITAL (U.S.A.), INC.
By: /s/ XXXXXX X. XXXXXXX
---------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Secretary and Treasurer
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GROTECH PARTNERS IV, L.P.
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
UTECH CLIMATE CHALLENGE FUND, L.P.
BY: ARETE CLIMATE CHALLENGE PARTNERS, LLC
By: /s/ XXXXXX X. XXXX, XX.
---------------------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: Managing Member
UTILITY COMPETITIVE ADVANTAGE FUND
By: /s/ XXXXXXX X. XXXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Illegible
FBR TECHNOLOGY VENTURE PARTNERS,
L.P.
By: /s/ XXXX XXXXXXXX
---------------------------------
Name: Xxxx Xxxxxxxx
Title: Illegible
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