EXHIBIT B
FiveCom, Inc. Principal Stockholders Agreement
THIS AGREEMENT, made as of this 28th day of May, 1998, by and between
Central Maine Power Company, a Maine investor-owned utility and Maine
corporation with a place of business at Augusta, Maine and mailing address of
00 Xxxxxx Xxxxx, Xxxxxxx, Xxxxx 00000 (hereinafter called "CMP") and
Northeast Utilities, a Massachusetts business trust with a place of business
in Brush Hill, Massachusetts and mailing address of P. O. Xxx 000, Xxxxxxxx,
Xxxxxxxxxxx 00000-0000 (hereinafter called "NU").
WITNESSETH:
WHEREAS, CMP and certain affiliates and certain affiliates of NU intend
to enter into a Restructuring and Contribution Agreement, the intent of
which is to cause the creation of FiveCom, Inc. a Delaware corporation
(hereinafter called "FiveCom"), which will succeed to the ownership of
FiveCom LLC (hereinafter called "Old FiveCom"), NECOM LLC and FiveCom of
Maine LLC, Massachusetts limited liability companies, and result in CMP,
through its affiliate MaineCom Services, owning 52.76%, and NU, through its
affiliate Mode 1 Communications, Inc. (formerly NU/Mode 1 Communications,
Inc. and hereinafter called "Mode 1"), owning 40.78%, of the common stock of
FiveCom (all of such transactions being hereinafter called, collectively, the
"Restructuring'); and
WHEREAS, CMP and NU intend to sell certain of the common stock which they
own in FiveCom in a public offering (hereinafter called the "Offering") and
to cause FiveCom to offer certain of its own shares in such Offering as well,
such that the parties will collectively own, post-Offering, approximately 51%
or more of the common stock of FiveCom; and
WHEREAS, the parties desire to preserve certain of the rights that each
has under the NECOM LLC Amended and Restated Operating Agreement, dated as of
July 11, 1996, by and between Old FiveCom and Mode 1 following the
Restructuring and prior to the Offering, and, following the Offering, to
alter such rights going forward, upon the terms stated below.
NOW, THEREFORE, CMP and NU agree as follows:
ARTICLE 1
POST-RESTRUCTURING/PRE-OFFERING RIGHTS
1.1 Between the Restructuring and the Offering, each party agrees that,
without the agreement and consent of the other party, it will not permit
FiveCom, nor will such party permit any of its respective subsidiaries,
including, respectively, MaineCom Services and Mode 1, to take any action the
effect of which would be to allow or cause FiveCom to take any of the
following actions:
a. Contracts With A Party or Affiliate. Enter into any material
agreement, contract, instrument or other transaction with either party or any
affiliate thereof, other than any 100% owned subsidiary of FiveCom (such
approval not to be unreasonably withheld if entered into at no greater than
market rates, on commercially reasonable terms and conditions such as are no
less favorable to FiveCom than would be available in a bona fide arms' length
transaction with a person, trust, corporation, organization, partnership or
other entity (hereinafter called "Person") which is not an affiliate);
b. Merger, Sale of Assets. Merge or consolidate with any Person,
liquidate or dissolve, change its form of organization, or sell, lease,
exchange or transfer all or substantially all of its assets;
c. Indebtedness. Authorize the incurrence, assumption or guaranty, or
suffer the existence, of any indebtedness in excess of the sum of (A) $50,000
in the aggregate during any one fiscal year and at any one time outstanding,
(B) a reasonable amount of working capital indebtedness, (C) indebtedness
secured by "Permitted Liens" and (D) any other indebtedness in an operating
budget previously approved by the parties or otherwise permitted under (f);
"Permitted Liens" is hereby defined to mean any mortgage, deed of trust,
security interest, pledge, hypothecation, encumbrance, lien (statutory or
other), or other security agreement and the filing of any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction in
respect of any of the foregoing (hereinafter called "Lien") created by the
security documents in connection with a loan from any lender which provides
financing for the purchase and installation of any portion of New England
Optical Network and/or any extension or refinancing thereof; (b)
materialmen's, mechanics', workers', repairmen's, employees' or other like
Liens in favor of any Person which arise in the ordinary course of business
of FiveCom but not (unless otherwise permitted by this Agreement) in
connection with any indebtedness or guarantee obligation; (c) Liens arising
out of judgments, award or appeals with respect to which at the time an
appeal or proceeding for review is being prosecuted in good faith and which
have been bonded or for the payment of which adequate reserves shall have
been provided; (d) any Lien securing indebtedness permitted under this
Section; and (e) minor defects, irregularities, encumbrances and clouds on
title and statutory liens which do not materially impair the property
affected thereby and which do not individually or in the aggregate materially
impair the performance, cost efficiency, value, utility, remaining economic
useful life, reliability or residual value of the property of FiveCom or the
use thereof for its intended purpose.
d. Amendments or Assignments, etc. Amend or modify, waive compliance
with any material provision of, terminate, assign any material rights FiveCom
may have under, or consent to or permit the assignment by any other Person of
any material right such Person may have under, or giving consents or
exercising material rights under, or agreeing to any such amendment,
modification, termination or consent of, or agreeing to any waiver of
compliance with any provision of, or agreeing to any such assignment or
exercise of any rights under, the agreements, documents, instruments and
contracts listed under the following exhibit designations in Item 16(a) to
the Registration Statement on Form S-1 of NorthEast Optic Network, Inc. filed
with the Securities and Exchange Commission on May 22, 1998: 1.1-4.3 and
10.1-10.37, and any other material agreement to which the Company is a party.
e. Liens. Creating or otherwise allowing any Lien to be on, or
otherwise to affect, any of FiveCom's property, except Permitted Liens;
f. Budget and Capital Improvements. Adopt the annual budgets and
approve capital expenditures exceeding the limits therein or as otherwise
approved hereunder; notwithstanding the foregoing, FiveCom's management may
authorize capital expenditures or indebtedness arising out of an emergency
which requires immediate action, so long as they give notice to the parties
as soon as possible of the incurrence of such expenditures and obtain any
requisite consent to the continuation of any such expenditures after the
immediate emergency has passed;
g. Charges. Approve annually (at the same time as the budget is
approved as per paragraph (f) above) all charges under the agreements or
contracts referenced in paragraph (a) above, and any exercise of any material
rights or elections under such agreements or contracts;
h. Bankruptcy Filing. (i) Commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or
any substantial part of its assets, or making a general assignment for the
benefit of its creditors; or (ii) if there shall be commenced against FiveCom
any case, proceeding or other action of a nature referred to in clause (i)
above, taking any action in furtherance of, or indicating its consent to,
approval of, or acquiescence, therein, or (iii) admitting in writing its
inability to pay its debts as they become due; and
i. Sale of Valuable Assets. Sell, assign or otherwise transfer title
to any asset, or any group of assets in the same transaction, or in related
transactions, having an aggregate value in excess of $500,000.
ARTICLE 2
RIGHT OF FIRST OFFER
2.1 (a) Offer to Company and Other Party: If either party ("Offering
Party") desires to sell, transfer or otherwise dispose for value all or any
of its common stock of FiveCom, other than in connection with the Offering,
such Offering Party (or its successor in interest, if any, should the
Offering Party have dissolved or filed for bankruptcy) shall first offer such
common stock to the Company and the other party ("Offeree Party") by giving
to the Company and to the Offeree Party written notice (the "Offer Notice")
of such Offering Party's desire to sell, transfer, or otherwise dispose of
such common stock, and all material terms and conditions of the offer
(including, without limitation, the proposed purchase price). Failure on the
part of the Offering Party to issue such Offer Notice and/or to thereafter
observe the requirements of this Section 2.1 (a) shall render any purported
transfer of such common stock void and of no effect. The Company and the
Offeree Party shall have an option to purchase such common stock on such
terms, and at such offering price as set forth in the Offering Notice. Such
option shall be exercised within thirty (30) days after such notice by notice
to the Offering Party. The Company shall have priority over the Offeree
Party, and, if the Company exercises its option, the option of the Offeree
Party shall only cover that portion of the common stock, if any, not covered
by the Company in exercising its option. In the event that neither the
Company nor the Offeree Party exercises their options as to all offered
common stock within thirty (30) days after the Offer Notice by giving notice
of their exercise of such option, or, having given notice of exercise of the
option, are unable to consummate the purchase for reasons beyond the Offering
Party's control within a period ending thirty (30) days after the date of the
last qualifying notice of exercise, the Offering Party within one hundred
eighty (180) days after the expiration of the last right of the Company and
the Offeree Party to purchase such common stock, may sell or assign any
remaining, common stock, on substantially the terms stated in the Offer
Notice and at a price no lower than set forth in the Offer Notice. If such
180-day period has expired, the price is lower, or the other terms are
different in any material respect, the Offering Party shall be obligated to
re-offer the common stock in accordance with the terms of this Section 2.1.
Any transfer of common stock undertaken pursuant to this Section shall be
subject to the provisions of Section 2.3
(b) Option to Purchase on Certain Events: Upon either party 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
Company and the other party shall have an option to purchase all of the
common stock owned by such party's predecessor in interest (or, in the case
of the debtor in possession, owned by such party) under the procedures set
forth in subsection (a) above, other than that (i) the price shall be the
Fair Market Value, as determined in accordance with subsection (c) below, and
(ii) if the Company does not receive an Offer Notice, the rights of the
Company and the other party shall accrue upon the receipt of actual notice by
the Company of the event triggering its rights hereunder. In the event that
there is no Offer Notice, the Company shall send the other party a notice of
its rights hereunder within 60 days after the Company receives such actual
notice. The provisions of subsection (a) above shall also govern in the
event that the options under this subsection (b) are not fully exercised.
(c) Determination of Fair Market Value: For the purpose of this
Agreement, the parties shall attempt to agree on the Fair Market Value of the
common stock. If not agreed to by the parties within sixty (60) days after a
request seeking an agreement as to Fair Market Value under this Agreement
either by a party or by the Company, each party shall immediately name an
appraiser and the two appraisers so named shall, within twenty days of the
date of the response of such party, name a third appraiser (the "Third
Appraiser"); provided that if a party shall fail to name its appraiser in a
timely fashion, the appraiser named by the other party in a timely fashion
shall be the sole appraiser. The panel of three appraisers, or the appraiser
named by the single party in a timely fashion, as the case may be, shall
issue a written report determining the Fair Market Value of the common stock,
which report shall be issued by no later than the date sixty (60) days after
the date of the response of such party. If the panel of appraisers is not
unanimous in its determination of Fair Market Value, then the opinion of the
Third Appraiser shall be controlling. Such determination whether made by the
unanimous panel of appraisers, the Third Appraiser, or, if one of the parties
shall have failed to name its appraiser in a timely fashion, the single
appraiser named by a party in a timely fashion, shall constitute the Fair
Market Value of the common stock and shall be binding and conclusive on the
parties. The closing on the transfer of the common stock shall occur on the
date 120 days after the initial request for an agreement as to Fair Market
Value, unless the parties shall establish an earlier date. The price to be
paid at the closing shall be the Fair Market Value of the common stock, and
the sale shall be for cash.
2.2 (a) Disposition: Subject to this Article 2, neither party may
sell, assign, transfer, exchange, mortgage, pledge, grant, hypothecate, or
otherwise transfer ("Dispose" or "Disposition") all or a portion of the
party's common stock,
(i) without an opinion of counsel satisfactory to the Company that
such assignment satisfies registration requirements under, or is exempt
from the registration requirements of, the applicable state and federal
securities laws; and
(ii) unless and until the Company receives from the assignee the
information and agreements that the Company may reasonably require,
including but not limited to any taxpayer identification number and any
agreement that may be required by an taxing jurisdiction.
(b) Conditions for Transfer: In the event of the Disposition of a
party's common stock, and as a condition to recognizing of the effectiveness
and binding nature of any such Disposition, the other party or the Company
may require the selling party and the proposed purchaser, transferee or
successor-in-interest, as the case may, be to execute, acknowledge and
deliver to the Company and the other party such instruments of transfer,
assignment and assumption and such other certificates, representations and
documents, and to perform all such other acts which the Company and the other
party may deem necessary or desirable to:
(i) constitute such purchaser, as transferee or successor-in-
interest as such;
(ii) confirm that the person desiring to acquire an interest or
interests in the Company has accepted, assumed and agreed to be subject and
bound by all of the terms, obligations and conditions of this Agreement, as
the same may have been further amended; and
(iii) assure compliance with any applicable state and federal laws
including securities laws and regulations.
(c) Effective Date, Indemnification: The Disposing party hereby agrees
to indemnify the Company and the other party against any and all loss,
damage, or expense (including, without limitations, tax liabilities or loss
of tax benefits) arising directly or indirectly as a result of any transfer
or purported transfer in violation of this Article 2.
(d) Permitted Transfers: Common stock may be transferred (without
regard to this Article 2) to those affiliates of a party with which such
party is consolidated for federal income tax purposes, provided, however,
that the successor-in-interest complies with Section 2.2(b).
(e) Dispositions not in Compliance with this Article Void: Any
attempted Disposition of common stock by either party, other than in
accordance with this Article 2, shall be, and is declared to be, null and
void ab initio.
ARTICLE 3
POST OFFERING RIGHTS
3.1 Following the Offering and so long as (a) NU's common stock
interest in FiveCom is at least 10% of the outstanding common stock of
FiveCom, fully diluted, and (b) the aggregate common stock interest of NU and
CMP is at least 33 1/3% of the outstanding common stock of FiveCom, fully
diluted (the first date when either such circumstance shall not exist being
hereinafter called the "Release Date"), each party agrees that, without the
agreement and consent of the other party, it will not permit FiveCom, nor any
of its respective subsidiaries, including, respectively, MaineCom Services
and Mode 1, to take any action the effect of which would be to allow or cause
FiveCom to take any of the actions specified in Sections 1.1(b) and (h)
above.
3.2 Following the Release Date, this Agreement shall be of no further
force and effect.
ARTICLE 4
MISCELLANEOUS
4.1 Limitation of Liability. No shareholder or trustee of NU or
shareholder or director of CMP shall be held to any liability whatever for
the payment of any sum of money or for damages or otherwise under this
Agreement, and this Agreement shall not be enforceable against any such
trustee or director in their or his or her individual capacities or capacity
and this Agreement shall be enforceable against the trustees of NU and the
directors of CMP only as such, and every person, firm, association, trust or
corporation having any claim or demand arising under this Agreement and
relating to NU or CMP, their respective shareholders, trustees or directors
shall look solely to the trust estate of NU or the assets of CMP for the
payment or satisfaction thereof.
4.2 Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
4.3 Counterparts. This Agreement may be executed by the parties in one
or more counterparts, all of which, taken together, constitute one Agreement.
IN WITNESS WHEREOF, we have hereunto set our hand on the date set forth
beside our names.
Dated: May 28, 1998
CENTRAL MAINE POWER COMPANY
By: /s/Xxxxx Marsh___________________
Its: Chief Financial Officer
NORTHEAST UTILITIES
By: _/s/_John X. Xxxxxxxx
Its: Executive Vice President and Chief Financial Officer
