AGREEMENT AND PLAN OF MERGER
among
NORTHGATE TELECOMMUNICATIONS PLC
a public limited company organized under the laws of England and Wales
("Parent")
NTP ACQUISITION SUB, INC.
a Delaware corporation and wholly owned subsidiary of Parent
("Merger Sub")
and
CASCADIA FIBER NETWORKS, INC.
a Delaware corporation
(the "Company")
Dated as of April 7, 2025
TABLE OF CONTENTS
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INDEX OF DEFINED TERMS
The following is a cross-reference index of defined terms used in this Agreement and the Section in which each such term is defined:
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April 7, 2025, is entered into among NORTHGATE TELECOMMUNICATIONS PLC, a public limited company organized under the laws of England and Wales ("Parent"), NTP ACQUISITION SUB, INC., a Delaware corporation and a direct, wholly owned subsidiary of Parent ("Merger Sub"), and CASCADIA FIBER NETWORKS, INC., a Delaware corporation (the "Company"). Parent, Merger Sub, and the Company are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Parent is a public limited company duly organized under the laws of England and Wales, headquartered at 14 Broadwick Place, London W1F 8HN, United Kingdom, listed on the London Stock Exchange under the ticker symbol "NTP" (LSE: NTP), with American Depositary Receipts trading on the New York Stock Exchange under the ticker symbol "NTPL" (NYSE: NTPL);
WHEREAS, Merger Sub is a corporation duly organized under the laws of the State of Delaware, incorporated on February 21, 2025, with Delaware File Number 7301524, and having its registered agent at Corporation Trust Associates, 1209 Orange Street, Wilmington, Delaware 19801, and is a direct, wholly owned subsidiary of Parent, formed solely for the purpose of effecting the Merger (as defined below), and has not conducted any business, incurred any liabilities, or acquired any assets other than in connection with the transactions contemplated by this Agreement;
WHEREAS, the Company is a corporation duly organized under the laws of the State of Delaware, headquartered at 2750 NW Thurman Street, Suite 400, Portland, Oregon 97210, with Delaware File Number 5197843, Employer Identification Number 45-6128937, founded in 2011, and engaged in the business of regional fiber-optic network infrastructure, including lit and dark fiber services, wavelength provisioning, data center interconnection, and related telecommunications services, operating approximately 4,800 route miles of fiber-optic network infrastructure across the States of Oregon, Washington, Idaho, and northern Nevada;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub, and the Company have each (i) determined that the Merger and the other transactions contemplated by this Agreement are fair to, and in the best interests of, their respective companies and their respective stockholders (or shareholders, as applicable) and (ii) approved and declared advisable this Agreement and the transactions contemplated hereby, including the Merger;
WHEREAS, the Board of Directors of the Company has resolved to recommend that the stockholders of the Company adopt this Agreement (the "Company Board Recommendation");
WHEREAS, the Merger is intended to qualify as a forward merger of Merger Sub with and into the Company under Section 251 of the General Corporation Law of the State of Delaware (the "DGCL"), with the Company surviving as a wholly owned subsidiary of Parent;
WHEREAS, the Parties previously entered into that certain Letter of Intent, dated February 14, 2025 (Reference No. NTP-CFN-LOI-2025-001), setting forth the principal terms upon which the Parties would negotiate this Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement, and as a material inducement to Parent and Merger Sub to enter into this Agreement, Timberline Growth Partners, LP (holding approximately 42.3% of the outstanding shares of Company common stock) and Ridgecrest Venture Fund III, LP (holding approximately 17.8% of the outstanding shares of Company common stock) are each entering into Voting and Support Agreements with Parent, substantially in the form attached hereto as Exhibit F (collectively, the "Voting and Support Agreements"), pursuant to which such stockholders have agreed, among other things, to vote their shares of Company common stock in favor of the adoption of this Agreement, representing in the aggregate approximately 60.1% of the outstanding shares of Company common stock, which exceeds the majority threshold required for the adoption of a merger agreement under DGCL Section 251(c); and
WHEREAS, the Parties desire to set forth certain representations, warranties, covenants, and agreements in connection with the Merger and to prescribe certain conditions to the consummation of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants, and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — THE MERGER
Section 1.1 — The Merger.
Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Section 251 of the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company (the "Merger"). As a result of the Merger, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation") and shall continue its corporate existence under the laws of the State of Delaware as a direct, wholly owned subsidiary of Parent.
Section 1.2 — Effective Time; Closing.
(a) The closing of the Merger (the "Closing") shall take place on the second (2nd) Business Day following the satisfaction or waiver (to the extent permitted by applicable Law) of all of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing), at the offices of Calderwood & Harkness LLP, 600 Lexington Avenue, 30th Floor, New York, New York 10022, or at such other place, date, or time as Parent and the Company may mutually agree in writing (the "Closing Date"). The Parties currently estimate that the Closing will occur in August 2025, subject to the timely satisfaction or waiver of all conditions to Closing.
(b) On the Closing Date, the Parties shall cause a Certificate of Merger (the "Certificate of Merger") to be executed, acknowledged, and filed with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware, or at such subsequent date and time as Parent and the Company shall agree and specify in the Certificate of Merger (the time the Merger becomes effective being hereinafter referred to as the "Effective Time").
Section 1.3 — Effects of the Merger.
The Merger shall have the effects set forth in the applicable provisions of the DGCL, including Sections 259, 260, and 261 thereof. Without limiting the generality of the foregoing, at the Effective Time, all of the property, rights, privileges, powers, and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities, and duties of each of the Company and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities, and duties of the Surviving Corporation.
Section 1.4 — Certificate of Incorporation of the Surviving Corporation.
At the Effective Time, the certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated in its entirety to read as set forth in the Amended and Restated Certificate of Incorporation attached hereto as Exhibit A, and, as so amended and restated, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the provisions thereof and of the DGCL; provided, however, that the provisions of Section 5.9 hereof concerning the indemnification and exculpation of directors and officers of the Company prior to the Effective Time shall not be amended, repealed, or otherwise modified for a period of six (6) years after the Effective Time in any manner that would adversely affect the rights thereunder of individuals who, at or prior to the Effective Time, were directors or officers of the Company, unless such modification is required by applicable Law.
Section 1.5 — Bylaws of the Surviving Corporation.
At the Effective Time, the bylaws of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated in their entirety to read as set forth in the Amended and Restated Bylaws attached hereto as Exhibit B, and, as so amended and restated, shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with the provisions thereof, the certificate of incorporation of the Surviving Corporation, and the DGCL; provided, however, that the provisions of Section 5.9 hereof concerning the indemnification and exculpation of directors and officers of the Company prior to the Effective Time shall not be amended, repealed, or otherwise modified for a period of six (6) years after the Effective Time in any manner that would adversely affect the rights thereunder of individuals who, at or prior to the Effective Time, were directors or officers of the Company, unless such modification is required by applicable Law.
Section 1.6 — Directors and Officers of the Surviving Corporation.
(a) The directors of the Surviving Corporation from and after the Effective Time shall be those individuals designated by Parent , each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or until their earlier death, resignation, or removal. Parent has initially designated Liam Sutherland as the sole director of the Surviving Corporation as of the Effective Time.
(b) The officers of the Surviving Corporation from and after the Effective Time shall be those individuals designated by Parent , each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified, or until their earlier death, resignation, or removal.
ARTICLE II — MERGER CONSIDERATION; CONVERSION OF SHARES; EXCHANGE PROCEDURES
Section 2.1 — Merger Consideration.
The aggregate consideration for the Merger shall be Seven Hundred Fifty Million Dollars ($750,000,000) in cash (the "Aggregate Merger Consideration"), without interest, subject to adjustment as set forth in Section 2.6. The Aggregate Merger Consideration shall be payable entirely in cash. No stock, securities, or other non-cash consideration shall be issued or paid in connection with the Merger.
Section 2.2 — Conversion of Shares.
At the Effective Time, by virtue of the Merger and without any action on the part of any holder of any shares of capital stock of the Company or Merger Sub:
(a) Company Common Stock. Each share of common stock, par value $0.001 per share, of the Company (the "Company Common Stock") issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and Dissenting Shares) shall be converted into the right to receive an amount in cash, without interest, equal to the Per Share Merger Consideration.
(b) Per Share Merger Consideration. The "Per Share Merger Consideration" shall be an amount in cash equal to the Aggregate Merger Consideration (as adjusted pursuant to Section 2.6) divided by the total number of Fully Diluted Shares. "Fully Diluted Shares" means the total number of shares of Company Common Stock outstanding immediately prior to the Effective Time calculated on a fully diluted basis, including, without duplication, all shares of Company Common Stock issuable upon the exercise of all outstanding options (whether or not then vested), the settlement of all outstanding restricted stock units, and the exercise of all outstanding warrants, in each case on a net-exercise or treasury-stock method basis, as applicable . As of the date of this Agreement, the total number of Fully Diluted Shares is 47,500,000, and the implied Per Share Merger Consideration is Fifteen Dollars and Seventy-Eight Point Nine Five Cents ($15.7895), rounded to the nearest cent: $15.79. The Per Share Merger Consideration shall be recalculated at the Effective Time based on the actual number of Fully Diluted Shares at such time and the Aggregate Merger Consideration as adjusted pursuant to Section 2.6.
(c) Excluded Shares. Each share of Company Common Stock that is held in the treasury of the Company, or that is owned by Parent, Merger Sub, or any direct or indirect wholly owned subsidiary of Parent or the Company, in each case immediately prior to the Effective Time (collectively, "Excluded Shares"), shall be automatically cancelled and retired and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.
(d) Merger Sub Common Stock. At the Effective Time, each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one (1) validly issued, fully paid, and nonassessable share of common stock of the Surviving Corporation. From and after the Effective Time, each certificate, if any, evidencing ownership of shares of Merger Sub common stock shall evidence ownership of shares of common stock of the Surviving Corporation.
Section 2.3 — Treatment of Company Equity Awards.
(a) Company Stock Options. At the Effective Time, each outstanding and unexercised option to purchase shares of Company Common Stock granted under any Company equity incentive plan (each, a "Company Stock Option"), whether or not then vested and exercisable (including any Company Stock Option that becomes vested and exercisable by reason of the acceleration provisions of the applicable Company equity incentive plan triggered by the Merger as a "change of control" event thereunder), shall be cancelled and converted automatically into the right to receive, as soon as practicable following the Effective Time (and in no event later than ), an amount in cash (without interest) equal to the product of (i) the excess, if any, of the Per Share Merger Consideration over the exercise price per share of such Company Stock Option, multiplied by (ii) the number of shares of Company Common Stock subject to such Company Stock Option, less any applicable withholding Taxes required to be deducted and withheld therefrom. For the avoidance of doubt, any Company Stock Option with an exercise price per share that is equal to or greater than the Per Share Merger Consideration shall be cancelled without any cash payment or other consideration being made in respect thereof.
(b) Company Restricted Stock Units. At the Effective Time, each outstanding restricted stock unit (whether or not vested) relating to shares of Company Common Stock granted under any Company equity incentive plan (each, a "Company RSU"), including any Company RSU that becomes vested by reason of the acceleration provisions of the applicable Company equity incentive plan triggered by the Merger as a "change of control" event thereunder, shall be cancelled and converted automatically into the right to receive, as soon as practicable following the Effective Time (and in no event later than ), an amount in cash (without interest) equal to the product of (i) the Per Share Merger Consideration, multiplied by (ii) the number of shares of Company Common Stock subject to such Company RSU, less any applicable withholding Taxes required to be deducted and withheld therefrom.
(c) Company Warrants. At the Effective Time, each outstanding warrant to purchase shares of Company Common Stock (each, a "Company Warrant") shall be cancelled and converted automatically into the right to receive, as soon as practicable following the Effective Time , an amount in cash (without interest) equal to the product of (i) the excess, if any, of the Per Share Merger Consideration over the exercise price per share of such Company Warrant, multiplied by (ii) the number of shares of Company Common Stock issuable upon exercise of such Company Warrant, less any applicable withholding Taxes required to be deducted and withheld therefrom. For the avoidance of doubt, any Company Warrant with an exercise price per share that is equal to or greater than the Per Share Merger Consideration shall be cancelled without any cash payment or other consideration being made in respect thereof.
(d) Corporate Actions. Prior to the Effective Time, the Company shall take all actions necessary (including adopting any required resolutions and providing any required notices) to effectuate the treatment of Company Stock Options, Company RSUs, and Company Warrants as set forth in this Section 2.3, and to ensure that no holder of any Company Stock Option, Company RSU, or Company Warrant shall be entitled to receive any shares of capital stock of the Company, the Surviving Corporation, Parent, or any of their respective Affiliates in respect thereof following the Effective Time.
Section 2.4 — Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and that are held by any holder who has properly demanded and perfected appraisal rights with respect to such shares in accordance with Section 262 of the DGCL and who has not effectively withdrawn or lost the right to appraisal as of the Effective Time (such shares being herein referred to as "Dissenting Shares") shall not be converted into the right to receive the Per Share Merger Consideration, but instead the holders of such Dissenting Shares shall be entitled to receive payment of the fair value of such Dissenting Shares as determined in accordance with Section 262 of the DGCL, unless and until any such holder fails to perfect, effectively withdraws, or otherwise loses the right to appraisal under the DGCL.
(b) If any holder of Dissenting Shares fails to perfect, effectively withdraws, or otherwise loses the right to appraisal under Section 262 of the DGCL, then, as of the later of the Effective Time and the occurrence of such event, such holder's shares shall thereupon automatically be deemed to have been converted as of the Effective Time into the right to receive the Per Share Merger Consideration, without interest thereon, and such shares shall no longer be considered Dissenting Shares.
(c) The Company shall give Parent prompt notice of any demands for appraisal received by the Company, any withdrawals of such demands, and any other instruments served on the Company relating to any exercise of appraisal rights under the DGCL pursuant to Section 262 thereof, and Parent shall have the right to all negotiations and proceedings with respect to such demands, subject to the Company's prior written consent (not to be unreasonably withheld, conditioned, or delayed). The Company shall not, except with the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned, or delayed), make any payment with respect to, or settle or offer to settle, any such demands for appraisal.
Section 2.5 — Exchange Procedures.
(a) Paying Agent. Prior to the Effective Time, Parent shall appoint Trident Transfer Agency, Inc., located at 480 Washington Boulevard, Jersey City, New Jersey 07310, to act as exchange agent and paying agent for the payment of the Per Share Merger Consideration in respect of shares of Company Common Stock converted pursuant to Section 2.2(a) (the "Paying Agent"), pursuant to an agreement reasonably acceptable to the Company. Parent shall pay all charges and expenses of the Paying Agent.
(b) Exchange Fund. Promptly following the Effective Time (and in no event later than two (2) Business Days following the Effective Time), Parent shall deposit, or cause to be deposited, with the Paying Agent, by wire transfer of immediately available funds, cash in an amount sufficient to pay the aggregate Per Share Merger Consideration in respect of all shares of Company Common Stock to be converted into the right to receive the Per Share Merger Consideration pursuant to Section 2.2(a) (net of the Escrow Amount to be deposited with the Escrow Agent pursuant to Section 8.5) (such cash being hereinafter referred to as the "Exchange Fund"). The Paying Agent shall invest the Exchange Fund as directed by Parent; provided, that (i) any such investments shall be in direct short-term obligations of, or short-term obligations fully guaranteed as to principal and interest by, the United States of America, or in short-term commercial paper obligations rated A-1 or P-1 or better by Standard & Poor's Rating Services or Moody's Investors Service, Inc., respectively, or in certificates of deposit, bank repurchase agreements, or banker's acceptances of commercial banks with capital exceeding $10,000,000,000, and (ii) no such investment or loss thereon shall affect the amounts payable to holders of shares of Company Common Stock hereunder. Any interest or other income resulting from such investments shall be the property of, and paid to, Parent. In the event of any shortfall in the Exchange Fund resulting from any investment loss, Parent shall, or shall cause the Surviving Corporation to, promptly deposit additional funds with the Paying Agent to the extent necessary to ensure that the Exchange Fund is at all times sufficient to pay the Aggregate Merger Consideration payable in respect of shares converted pursuant to Section 2.2(a).
(c) Letter of Transmittal. As promptly as practicable after the Effective Time, and in no event later than five (5) Business Days thereafter, the Paying Agent shall mail or otherwise deliver to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the "Certificates"), or each holder of non-certificated shares of Company Common Stock represented by book entry (the "Book-Entry Shares"), that were converted into the right to receive the Per Share Merger Consideration pursuant to Section 2.2(a): (i) a letter of transmittal in substantially the form attached hereto as Exhibit C (the "Letter of Transmittal"), which shall specify that delivery shall be effected, and risk of loss and title to the Certificates or Book-Entry Shares shall pass, only upon proper delivery of the Certificates (or affidavits of loss in lieu thereof as contemplated by Section 2.5(g)) or transfer of the Book-Entry Shares to the Paying Agent, and which shall be in such form and contain such other provisions as Parent and the Company shall reasonably agree; and (ii) instructions for use in effecting the surrender of the Certificates or transfer of the Book-Entry Shares in exchange for the Per Share Merger Consideration.
(d) Exchange Procedures. Each holder of Certificates or Book-Entry Shares that have been converted into the right to receive the Per Share Merger Consideration shall be entitled to receive, upon (i) surrender to the Paying Agent of such Certificates for cancellation, together with a duly completed and validly executed Letter of Transmittal, a properly completed IRS Form W-9 (or the applicable IRS Form W-8, as appropriate), and such other documents as may be reasonably required pursuant to the instructions set forth in the Letter of Transmittal, or (ii) receipt by the Paying Agent of an "agent's message" (or such other evidence, if any, of transfer as the Paying Agent may reasonably request) in the case of a book-entry transfer of Book-Entry Shares, together with a duly completed and validly executed Letter of Transmittal, a properly completed IRS Form W-9 (or the applicable IRS Form W-8, as appropriate), and such other documents as may be reasonably required, the Per Share Merger Consideration for each share of Company Common Stock formerly represented by such Certificates or Book-Entry Shares. No interest shall be paid or accrue on the cash payable upon the surrender or transfer of any Certificates or Book-Entry Shares. In the event of a transfer of ownership of Company Common Stock that is not registered in the transfer records of the Company, payment of the Per Share Merger Consideration may be made to a Person other than the Person in whose name the Certificate so surrendered or the Book-Entry Share so transferred is registered if the Certificate is properly endorsed or otherwise in proper form for transfer (or the Book-Entry Share is properly transferred) and the Person requesting such payment pays any transfer or other similar Taxes required by reason of such payment to a Person other than the registered holder of such Certificate or Book-Entry Share or establishes to the satisfaction of the Surviving Corporation that such Tax has been paid or is not applicable.
(e) No Interest; Withholding Rights. No interest shall be paid or shall accrue on any cash payable to holders of Certificates or Book-Entry Shares pursuant to the provisions of this Article II. Parent, the Surviving Corporation, and the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article II such amounts as are required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code"), or any applicable provision of state, local, or non-U.S. Tax Law. To the extent that amounts are so deducted and withheld and timely remitted to the applicable Governmental Authority, such deducted and withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund that remains undistributed to the former holders of Company Common Stock for twelve (12) months after the Effective Time shall be delivered to the Surviving Corporation, upon demand, and any former holders of Company Common Stock who have not theretofore complied with this Section 2.5 shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat, or other similar Laws) for payment of the Per Share Merger Consideration to which such holders are entitled pursuant to Section 2.2(a), without any interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving Corporation, the Paying Agent, or any other Person shall be liable to any former holder of Company Common Stock for any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat, or similar Law.
(g) Lost, Stolen, or Destroyed Certificates. In the event that any Certificates shall have been lost, stolen, or destroyed, the Paying Agent shall make payment of the Per Share Merger Consideration deliverable in respect of the shares of Company Common Stock represented by such lost, stolen, or destroyed Certificates, upon receipt of (i) an affidavit of that fact by the claimant, and (ii) such indemnity bond against any claim that may be made against the Paying Agent, the Surviving Corporation, or Parent with respect to such Certificates as the Paying Agent, the Surviving Corporation, or Parent may reasonably require.
Section 2.6 — Working Capital Adjustment.
(a) Target Net Working Capital. The "Target NWC" shall be Fourteen Million Eight Hundred Thousand Dollars ($14,800,000).
(b) Estimated Closing Statement. Not less than Business Days prior to the Closing Date, the Company shall prepare and deliver to Parent a written statement (the "Estimated Closing Statement") setting forth the Company's good faith estimate of the Closing Net Working Capital of the Company as of the close of business on the day immediately preceding the Closing Date (the "Estimated NWC"), calculated in accordance with the definitions, methodologies, principles, practices, estimation techniques, and policies set forth on Exhibit D hereto (the "Accounting Principles"). The Estimated Closing Statement shall be prepared in reasonable detail and shall include supporting documentation and work papers. The Company shall provide Parent and its Representatives with reasonable access to the Company's books, records, and personnel in connection with Parent's review of the Estimated Closing Statement, and shall consider in good faith any comments provided by Parent prior to the Closing Date. "Closing Net Working Capital" means the current assets of the Company and its Subsidiaries (determined in accordance with the Accounting Principles) minus the current liabilities of the Company and its Subsidiaries (determined in accordance with the Accounting Principles), in each case as of the close of business on the day immediately preceding the Closing Date.
(c) Preliminary Adjustment at Closing. The Aggregate Merger Consideration payable at the Closing shall be adjusted as follows (the range of plus or minus One Million Five Hundred Thousand Dollars ($1,500,000) from the Target NWC being referred to as the "Collar"):
(i) If the Estimated NWC exceeds the Target NWC by more than One Million Five Hundred Thousand Dollars ($1,500,000) (i.e., the Estimated NWC exceeds $16,300,000), the Aggregate Merger Consideration payable at the Closing shall be increased, dollar-for-dollar, by the amount by which the Estimated NWC exceeds the sum of the Target NWC plus $1,500,000.
(ii) If the Estimated NWC is less than the Target NWC by more than One Million Five Hundred Thousand Dollars ($1,500,000) (i.e., the Estimated NWC is less than $13,300,000), the Aggregate Merger Consideration payable at the Closing shall be decreased, dollar-for-dollar, by the amount by which the Target NWC minus $1,500,000 exceeds the Estimated NWC.
(iii) If the Estimated NWC is within plus or minus One Million Five Hundred Thousand Dollars ($1,500,000) of the Target NWC (i.e., the Estimated NWC is between $13,300,000 and $16,300,000, inclusive), no adjustment to the Aggregate Merger Consideration shall be made at the Closing pursuant to this Section 2.6(c).
(d) Post-Closing Determination. Within ninety (90) days after the Closing Date, Parent shall prepare and deliver to the Stockholder Representative a written statement (the "Post-Closing Statement") setting forth Parent's calculation of the actual Closing Net Working Capital of the Company as of the close of business on the day immediately preceding the Closing Date ("Final NWC"), calculated in accordance with the Accounting Principles. The Post-Closing Statement shall be prepared in reasonable detail, with supporting documentation and work papers, and shall be prepared on a basis consistent with the Accounting Principles. Parent shall provide the Stockholder Representative and its representatives with reasonable access to the books, records, and personnel of the Surviving Corporation in connection with the Stockholder Representative's review of the Post-Closing Statement.
(e) Dispute Resolution. The Stockholder Representative shall have thirty (30) days following receipt of the Post-Closing Statement (the "Review Period") to review the Post-Closing Statement. If the Stockholder Representative disagrees with the Post-Closing Statement, the Stockholder Representative shall, on or before the last day of the Review Period, deliver written notice to Parent setting forth in reasonable detail those items and amounts in the Post-Closing Statement as to which the Stockholder Representative disagrees, together with the Stockholder Representative's proposed determination of each such disputed item and the basis therefor (a "Notice of Disagreement"). If no Notice of Disagreement is delivered to Parent prior to the expiration of the Review Period, the Post-Closing Statement shall be deemed accepted by the Stockholder Representative and shall be final, binding, and conclusive on all Parties. If a Notice of Disagreement is properly delivered, Parent and the Stockholder Representative shall attempt in good faith to resolve any disputed items within fifteen (15) days following delivery of the Notice of Disagreement. If Parent and the Stockholder Representative are unable to resolve all such disputed items within such fifteen (15)-day period, the remaining disputed items shall be submitted for resolution to an independent accounting firm of national reputation that is mutually agreed upon by Parent and the Stockholder Representative (the "Independent Accounting Firm"); provided, however, that Hawthorne & Sable LLP, the Company's independent auditors, shall not serve as the Independent Accounting Firm. The Independent Accounting Firm shall be instructed to render its determination as promptly as practicable (and in any event within forty-five (45) days following its engagement) and its determination with respect to each disputed item shall not be more favorable to Parent than Parent's position or more favorable to the Stockholder Representative than the Stockholder Representative's position with respect to such item, as set forth in the Post-Closing Statement and the Notice of Disagreement, respectively. The determination of the Independent Accounting Firm shall be final, binding, and conclusive on all Parties. The fees and expenses of the Independent Accounting Firm shall be borne by Parent, on the one hand, and the Stockholder Representative (on behalf of the former Company stockholders), on the other hand, in proportion to the extent to which each party's positions were not adopted by the Independent Accounting Firm (as determined by the Independent Accounting Firm).
(f) Post-Closing True-Up Payment. Within five (5) Business Days following the final determination of Final NWC (whether by mutual agreement, deemed acceptance, or determination by the Independent Accounting Firm):
(i) If the Final NWC exceeds the Estimated NWC, and the application of Final NWC in place of Estimated NWC to the adjustment mechanism in Section 2.6(c) would result in an increase in the Aggregate Merger Consideration relative to the amount paid at the Closing (taking into account the Collar), then Parent shall pay to the Stockholder Representative (for distribution to the former Company stockholders, pro rata) the amount of such increase, by wire transfer of immediately available funds.
(ii) If the Final NWC is less than the Estimated NWC, and the application of Final NWC in place of Estimated NWC to the adjustment mechanism in Section 2.6(c) would result in a decrease in the Aggregate Merger Consideration relative to the amount paid at the Closing (taking into account the Collar), then the Stockholder Representative shall cause the amount of such decrease to be paid to Parent from the Escrow Amount (or, if the Escrow Amount is insufficient, from the former Company stockholders, pro rata), by wire transfer of immediately available funds.
(iii) For the avoidance of doubt, the Collar shall apply in the same manner to the Final NWC determination as it applies to the Estimated NWC determination at Closing pursuant to Section 2.6(c).
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedules delivered by the Company to Parent concurrently with the execution and delivery of this Agreement (the "Company Disclosure Schedules") (it being agreed that disclosure of any item in any section or subsection of the Company Disclosure Schedules shall be deemed disclosure with respect to any other section or subsection of the Company Disclosure Schedules to which the applicability of such disclosure is reasonably apparent on the face of such disclosure), the Company hereby represents and warrants to Parent and Merger Sub as follows:
Section 3.1 — Organization and Qualification.
The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business as presently conducted. The Company is duly qualified or licensed to do business and is in good standing (or the equivalent thereof) in each jurisdiction in which the nature of its business or the ownership, leasing, or operation of its properties makes such qualification or licensing necessary, including the States of Oregon, Washington, Idaho, and Nevada, except where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company's file number with the Secretary of State of the State of Delaware is 5197843. The Company has heretofore made available to Parent true and complete copies of the certificate of incorporation and bylaws of the Company, each as amended and in effect on the date hereof.
Section 3.2 — Subsidiaries.
Section 3.2 of the Company Disclosure Schedules sets forth a true and complete list of each Subsidiary of the Company, together with each such Subsidiary's jurisdiction of organization, authorized and outstanding equity interests, and the identity of each holder of equity interests in such Subsidiary. Each Subsidiary of the Company is duly organized, validly existing, and in good standing (or the equivalent thereof) under the laws of the jurisdiction of its organization and has all requisite organizational power and authority to own, lease, and operate its properties and assets and to carry on its business as presently conducted, except where the failure to be so organized, existing, in good standing, or to have such power and authority would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. All of the outstanding equity interests of each Subsidiary of the Company are owned, directly or indirectly, by the Company, free and clear of all Liens (other than restrictions on transfer under applicable securities laws and the organizational documents of such Subsidiaries). There are no outstanding options, warrants, rights, agreements, commitments, or other arrangements to acquire any equity interests of any Subsidiary of the Company.
Section 3.3 — Capitalization.
(a) The authorized capital stock of the Company consists of (i) 100,000,000 shares of Company Common Stock, par value $0.001 per share, of which, as of the date of this Agreement, 41,200,000 shares are issued and outstanding, and (ii) 10,000,000 shares of preferred stock, par value $0.001 per share, none of which are issued or outstanding. All issued and outstanding shares of Company Common Stock have been duly authorized, validly issued, fully paid, and nonassessable, and were issued in compliance with all applicable federal and state securities laws. No shares of Company Common Stock are held in the treasury of the Company.
(b) As of the date of this Agreement, the total number of Fully Diluted Shares is 47,500,000, consisting of (i) 41,200,000 shares of Company Common Stock outstanding, (ii) options to purchase an aggregate of 3,800,000 shares of Company Common Stock granted under the Company's equity incentive plans (at a weighted average exercise price of $7.42 per share), (iii) restricted stock units covering an aggregate of 1,950,000 shares of Company Common Stock granted under the Company's equity incentive plans, and (iv) warrants to purchase an aggregate of 550,000 shares of Company Common Stock (at a weighted average exercise price of $5.60 per share), in each case as calculated on a net-exercise or treasury-stock method basis as applicable and as set forth in greater detail on Section 3.3 of the Company Disclosure Schedules.
(c) The ownership of the outstanding shares of Company Common Stock, on a fully diluted basis, is as set forth on Section 3.3 of the Company Disclosure Schedules, and is, in summary, as follows:
(d) Except as set forth in Section 3.3 of the Company Disclosure Schedules or as expressly contemplated by this Agreement, there are no outstanding (i) shares of capital stock of, or other equity or voting interests in, the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock of, or other equity or voting interests in, the Company, (iii) options, warrants, calls, rights of first refusal, preemptive rights, anti-dilution rights, rights of first offer, subscription rights, or other rights, agreements, arrangements, or commitments of any character relating to the issued or unissued capital stock of, or other equity or voting interests in, the Company or obligating the Company to issue or sell any shares of capital stock of, or other equity or voting interests in, the Company, or securities convertible into or exchangeable for such shares or interests, or (iv) obligations of the Company to repurchase, redeem, or otherwise acquire any shares of capital stock of, or other equity or voting interests in, the Company.
(e) There are no outstanding contractual obligations of the Company to provide funds to, or make any investment in (whether in the form of a loan, capital contribution, or otherwise), any other Person, other than its Subsidiaries in the ordinary course of business.
Section 3.4 — Authority; No Conflict.
(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, subject, in the case of consummation of the Merger, to the adoption of this Agreement by holders of a majority of the outstanding shares of Company Common Stock in accordance with DGCL Section 251(c) (the "Stockholder Approval"). The execution, delivery, and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, have been duly and validly authorized by the Board of Directors of the Company, and, except for the receipt of the Stockholder Approval, no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution, and delivery by the other Parties hereto, constitutes a legal, valid, and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar Laws affecting creditors' rights and remedies generally and to general principles of equity (whether applied in a proceeding at law or in equity) (the "Bankruptcy and Equity Exception").
(c) The execution, delivery, and performance by the Company of this Agreement, and the consummation by the Company of the transactions contemplated hereby (including the Merger), do not and will not (i) conflict with or violate the certificate of incorporation or bylaws of the Company or any of its Subsidiaries, (ii) assuming the receipt of all Consents, approvals, authorizations, and permits described in Section 3.5 and, in the case of the consummation of the Merger, the receipt of the Stockholder Approval, conflict with or violate any Law applicable to the Company or any of its Subsidiaries or by which any of their respective properties or assets is bound, or (iii) result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would constitute a default) under, result in the loss of any benefit under, give rise to any right of termination, cancellation, acceleration, or put right under, or result in the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries under, any material Contract to which the Company or any of its Subsidiaries is a party or by which any of their respective properties or assets is bound, except, in the case of clauses (ii) and (iii) above, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and subject, in the case of clause (iii), to obtaining the change of control Consents identified in Section 3.4 of the Company Disclosure Schedules and the receipt of the required regulatory approvals described in Section 3.5.
Section 3.5 — Required Consents and Approvals.
The execution, delivery, and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, require the following Consents, approvals, authorizations, or permits from, or filings with or notifications to, Governmental Authorities and third parties:
(a) the filing of a premerger notification report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the expiration or early termination of the applicable waiting period thereunder;
(b) the receipt of the consent of the Federal Communications Commission (the "FCC") to the transfer of control of the Company's FCC licenses, including its international Section 214 authorization and any other FCC authorizations held by the Company or its Subsidiaries;
(c) the receipt of approval from the Oregon Public Utility Commission (the "Oregon PUC"), the Washington Utilities and Transportation Commission (the "Washington UTC"), the Idaho Public Utilities Commission (the "Idaho PUC"), and the Public Utilities Commission of Nevada (the "Nevada PUC," and together with the Oregon PUC, the Washington UTC, and the Idaho PUC, the "State PUCs") for the transfer of control of the Company's state public utility certifications;
(d) the submission of a voluntary notice to the Committee on Foreign Investment in the United States ("CFIUS") and the receipt of CFIUS clearance as described in Section 6.1(e);
(e) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware; and
(f) the third-party change of control Consents required under the material Contracts identified in Section 3.5 of the Company Disclosure Schedules (which are cross-referenced to Section 3.16 of the Company Disclosure Schedules).
Section 3.6 — Financial Statements.
(a) Section 3.6 of the Company Disclosure Schedules sets forth true and complete copies of (i) the audited consolidated financial statements of the Company and its Subsidiaries as of and for the fiscal years ended December 31, 2022, December 31, 2023, and December 31, 2024 (the "Annual Financial Statements"), and (ii) the unaudited consolidated financial statements of the Company and its Subsidiaries as of and for the interim period ended February 28, 2025 (the "Interim Financial Statements" and, together with the Annual Financial Statements, the "Company Financial Statements"). The Company Financial Statements (A) were prepared in accordance with United States generally accepted accounting principles ("GAAP"), consistently applied during the periods involved (except as may be indicated in the notes thereto or, in the case of the Interim Financial Statements, as permitted by GAAP for interim financial statements, and subject, in the case of the Interim Financial Statements, to normal year-end adjustments that are not material in amount or nature), and (B) fairly present, in all material respects, the consolidated financial position, results of operations, and cash flows of the Company and its Subsidiaries as of the dates and for the periods indicated therein.
(b) For the fiscal year ended December 31, 2024, the Company generated revenue of approximately One Hundred Eighty-Seven Million Four Hundred Thousand Dollars ($187,400,000) and EBITDA of approximately Sixty-One Million Two Hundred Thousand Dollars ($61,200,000).
(c) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, (iii) access to assets is permitted only in accordance with management's general or specific authorizations, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
Section 3.7 — Absence of Certain Changes.
Since December 31, 2024 through the date of this Agreement, (a) the Company and its Subsidiaries have conducted their business in the ordinary course in all material respects, and (b) there has not been any event, occurrence, development, or state of circumstances or facts that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.
Section 3.8 — Compliance with Laws.
The Company and its Subsidiaries are, and since January 1, 2022 have been, in material compliance with all applicable Laws, including all applicable telecommunications regulations, FCC rules and regulations, and State PUC regulations. Since January 1, 2022, neither the Company nor any of its Subsidiaries has received any written notice from any Governmental Authority alleging any material violation of any applicable Law, except as set forth in Section 3.8 of the Company Disclosure Schedules.
Section 3.9 — Litigation.
There are no Actions pending or, to the Company's Knowledge, threatened in writing against the Company or any of its Subsidiaries that would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, or that challenge the validity or enforceability of this Agreement or seek to enjoin or prohibit consummation of the Merger, except as set forth in Section 3.9 of the Company Disclosure Schedules.
Section 3.10 — Taxes.
(a) The Company and each of its Subsidiaries have timely filed (or caused to be timely filed) all material Tax Returns required to be filed by them (taking into account applicable extensions), and all such Tax Returns are true, correct, and complete in all material respects. The Company and each of its Subsidiaries have timely paid (or caused to be timely paid) all material Taxes due and owing (whether or not shown on any Tax Return). The Company's Employer Identification Number is 45-6128937.
(b) There are no material Liens for Taxes upon any property or asset of the Company or any of its Subsidiaries, other than Liens for current Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.
(c) No material claim, audit, investigation, or other proceeding with respect to Taxes is pending or, to the Company's Knowledge, threatened in writing against or with respect to the Company or any of its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has entered into any "closing agreement" as described in Section 7121 of the Code (or any corresponding or similar provision of state, local, or non-U.S. Tax Law) or received any private letter ruling from the Internal Revenue Service (or comparable ruling from any other Taxing authority) with respect to any material Tax matter.
(e) The representations and warranties in this Section 3.10 shall survive the Closing until sixty (60) days after the expiration of the applicable statute of limitations (including any extensions thereof) with respect to the underlying Tax matters to which such representations and warranties relate.
(f) Section 3.10 of the Company Disclosure Schedules sets forth such additional Tax matters as are disclosed therein.
Section 3.11 — Employee Benefit Plans.
(a) Section 3.11(a) of the Company Disclosure Schedules sets forth a true and complete list of each material "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and each material bonus, stock option, equity incentive, equity purchase, restricted stock, restricted stock unit, stock appreciation right, phantom equity, profit-sharing, savings, retirement, supplemental retirement, deferred compensation, severance, employment, change in control, retention, fringe benefit, cafeteria, welfare, medical, disability, life insurance, vacation, paid time off, and each other material employee compensation or benefit plan, agreement, program, policy, or arrangement, whether written or unwritten, in each case that is maintained, sponsored, or contributed to (or required to be contributed to) by the Company or any of its Subsidiaries, or under which the Company or any of its Subsidiaries has any current or contingent liability (each, a "Company Benefit Plan").
(b) Each Company Benefit Plan has been established, maintained, operated, and administered in all material respects in compliance with its terms and all applicable Laws, including ERISA and the Code.
(c) The Company's equity incentive plan(s) contain change of control provisions that provide for the accelerated vesting of Company Stock Options and Company RSUs upon the consummation of the Merger, as more particularly described in Section 3.11(c) of the Company Disclosure Schedules.
(d) As of the date of this Agreement, the Company and its Subsidiaries collectively employ approximately 620 employees.
Section 3.12 — Employment Matters.
(a) Section 3.12(a) of the Company Disclosure Schedules sets forth a true and complete list of each material employment agreement, consulting agreement, offer letter, severance agreement, change in control agreement, or similar agreement to which the Company or any of its Subsidiaries is a party, including the employment agreements with the following key executives:
(i) Derek Holmgren, Chief Executive Officer and Co-Founder;
(ii) Priya Ramachandran, Chief Technology Officer and Co-Founder; and
(iii) Tobias Engel, Chief Financial Officer.
(b) Neither the Company nor any of its Subsidiaries is a party to, or bound by, any collective bargaining agreement or other labor union contract, and to the Company's Knowledge, no labor organization or group of employees of the Company or any of its Subsidiaries has made a pending demand for recognition or certification. There is no pending or, to the Company's Knowledge, threatened strike, lockout, work stoppage, slowdown, or other material labor dispute with respect to any employees of the Company or any of its Subsidiaries.
(c) The Company and its Subsidiaries are in material compliance with all applicable Laws relating to employment and labor, including those relating to labor relations, equal employment opportunity, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights, labor standards, occupational health and safety, wages and hours, overtime pay, meal and rest breaks, child labor, worker classification, hiring, promotion, and termination of employees, working conditions, and immigration.
Section 3.13 — Intellectual Property.
(a) Section 3.13(a) of the Company Disclosure Schedules sets forth a true and complete list of all material intellectual Property owned by the Company or any of its Subsidiaries that is the subject of a registration, application, or filing with a Governmental Authority (the "Company Registered IP"), including all material patents, registered trademarks, registered copyrights, and domain name registrations.
(b) The Company and its Subsidiaries own or have a valid and enforceable right to use all material intellectual Property used in, held for use in, or necessary for the conduct of the business of the Company and its Subsidiaries as currently conducted. The Company's intellectual property portfolio includes, without limitation, proprietary network management software, certain patents relating to fiber-optic network optimization and provisioning technologies, and trademarks associated with the Company's brands and service offerings.
(c) To the Company's Knowledge, the conduct of the business of the Company and its Subsidiaries as currently conducted does not infringe, misappropriate, dilute, or otherwise violate, and has not infringed, misappropriated, diluted, or otherwise violated, the intellectual Property rights of any third party, in each case in any material respect. There are no Actions pending or, to the Company's Knowledge, threatened in writing against the Company or any of its Subsidiaries alleging any such infringement, misappropriation, dilution, or other violation.
Section 3.14 — Real Property; Easements; Rights-of-Way.
(a) Section 3.14(a) of the Company Disclosure Schedules sets forth a true and complete list of all real property owned in fee simple by the Company or any of its Subsidiaries (the "Owned Real Property"). The Company or one of its Subsidiaries has good and marketable fee simple title to each parcel of Owned Real Property, free and clear of all Liens except Permitted Liens.
(b) Section 3.14(b) of the Company Disclosure Schedules sets forth a true and complete list of all material real property leased, subleased, or licensed by the Company or any of its Subsidiaries as lessee, sublessee, or licensee (the "Leased Real Property").
(c) Section 3.14(c) of the Company Disclosure Schedules sets forth a true and complete description of all material easements, rights-of-way, licenses, permits, and similar agreements pursuant to which the Company or any of its Subsidiaries has the right to install, maintain, and operate fiber-optic cable and related infrastructure across approximately 4,800 route miles in the States of Oregon, Washington, Idaho, and northern Nevada. Each such easement, right-of-way, license, permit, or similar agreement is in full force and effect and constitutes a legal, valid, and binding obligation of the Company or the applicable Subsidiary, enforceable in accordance with its terms, subject to the Bankruptcy and Equity Exception.
Section 3.15 — Environmental Matters.
(a) The Company and its Subsidiaries are, and since January 1, 2022 have been, in material compliance with all applicable Environmental Laws.
(b) Neither the Company nor any of its Subsidiaries has received any written notice from any Governmental Authority or any third party alleging any material violation of, or material liability under, any Environmental Law that remains unresolved.
(c) There are no material environmental liabilities of the Company or any of its Subsidiaries, whether accrued, contingent, absolute, or otherwise.
(d) For purposes of this Agreement, "Environmental Laws" means all applicable Laws relating to pollution, protection of the environment, natural resources, or human health and safety (as it relates to exposure to Hazardous Substances), including the Comprehensive Environmental Response, Compensation, and Liability Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, and their state and local analogs.
Section 3.16 — Material Contracts.
(a) Section 3.16(a) of the Company Disclosure Schedules sets forth a true and complete list of each Contract to which the Company or any of its Subsidiaries is a party or by which any of them or their respective properties or assets is bound that falls within any of the following categories (each, a "Material Contract"):
(i) any Contract that provides for