NEON Communications, Inc. (Nasdaq:NOPT) and Exelon Enterprises Management, Inc. (EMI) announced the closing of an agreement under which EMI has provided $11.5 million of additional financing in the form of a convertible note. NEON plans to use this capital to selectively expand and enhance NEON's fiber optic network and to meet other working capital needs. EMI is the operational affiliate of Exelon Corporation's (NYSE-EXC) Capital Partners subsidiary and one of NEON's major shareholders.
EMI and NEON have executed a purchase agreement for $11.5 million in the form of 18 percent convertible, subordinated notes due in August 2008. EMI may convert the notes at any time into NEON common stock at a conversion price of $5.00 per share or 2.3 million shares, subject to certain anti-dilution provisions. EMI already owns 2.1 million shares of NEON's common stock.
The transaction with Exelon provides for an additional $10 million, payable either in cash or forgiveness of a portion of the $11.5 million in convertible debt on or before April 2002. The $10 million will satisfy EMI's remaining obligations under a September 2000, agreement. The current agreement releases all restrictions on the common stock issue to EMI at that time. Because EMI is contributing $10 million in lieu of certain fiber optic facilities and other obligations that were booked at NEON's operational value based on an independent appraisal value, the transaction will result in a one-time, non-cash charge to our statement of operations of approximately $60 million. This charge will be reflected in our third quarter 2001 results.
NEON Communications, Inc. is a wholesale communications provider of high bandwidth fiber optic capacity and end-to-end communications solutions to regional and national communications carriers on a 2,000-mile inter-city, regional, and metro network in the eleven-state Northeast and Mid-Atlantic markets. For more information, visit www.neoninc.com.
Exelon Corporation is the holding company of PECO Energy Company (PECO) and Commonwealth Edison Company (ComEd). Exelon, through subsidiaries, operates in three business segments: Energy Delivery, Generation and Enterprises. For more information, visit www.exeloncorp.com.