Item
1.01
|
Entry into a
Material Definitive Agreement.
|
On
July 2, 2019, FTE Networks, Inc. (“
FTE
”) completed its previously announced debt restructuring by entering
into an amended and restated Credit Agreement (the “
Credit Agreement Amendment
”) by and among the Company and
its subsidiaries, Lateral Juscom Feeder LLC (“
Lateral
”) and several lenders party thereto (together with Lateral,
the “
Lenders
”) and by amending and restating its Series A convertible notes (the “
Series A Notes
”)
and Series B promissory notes (the “
Series B Notes
”) issued to Fred Sacramone and Brian McMahon (together,
the “
Benchmark Sellers
”) and a super-senior bridge loan note (the “
Bridge Note,
” and together
with the Series A Notes and the Series B Notes, the “
Notes
”) issued to Mr. Sacramone.
Credit
Agreement Amendment Summary
Pursuant
to the Credit Agreement Amendment, terms of the $12.9 million super-senior bridge loan (the “
Lateral Bridge Loan
”)
were amended to extend the maturity to September 30, 2020, to amend the interest rate to 12% per annum payable in cash, to add
a 4% extension fee to the principal amount (subject to reduction) and to provide for monthly amortization payments based on available
cash flow. In addition, the terms of the $37.9 million senior debt were amended to extend the maturity to April 30, 2021, amend
the interest rate to 12% per annum payable in cash, to add a 4% extension fee to the principal amount thereof (subject to reduction)
and to include monthly amortization payments based on available cash flow.
As consideration for the
Credit Agreement Amendment, the Company issued to the Lenders 1,500,000 shares of the Company’s common stock and warrants
(the “
Warrants
”) exercisable to purchase 3,173,731 shares of the Company’s common stock (collectively,
the “
Lender Securities
”) with an initial exercise price of $3.00 per share. Pursuant to the terms of the Warrants,
in the event the Lateral Bridge Loan has not been paid by October 31, 2019, the exercise per share of half of the Warrants shall
be automatically reset to $0.01 and in the event the Lateral Bridge Loan has not been paid by December 31, 2019, the exercise
per share of the other half of the Warrants shall be automatically reset to $0.01. The Company also agreed that on December 31,
2019, the aggregate number of shares of the Company’s common stock issuable upon exercise of the Warrants will be automatically
adjusted on December 31, 2019 such that that Lateral and its affiliates will beneficially own, in the aggregate, inclusive of
all shares of common stock previously issued, 25% of the outstanding shares of the Company’s common stock on a fully-diluted
basis, subject to certain exceptions. As previously announced, on June 14, 2019, the NYSE American LLC (the “
Exchange
”)
granted the Company’s request to rely on an exception to the shareholder approval requirements otherwise applicable
to the issuance of the Lender Securities.
As
additional consideration for the Credit Agreement Amendment, the Company and Lateral entered into a registration rights agreement
(the “
Registration Rights Agreement
”) whereby the Company agreed to register the common stock issued to Lateral.
The Company and Lateral also entered into an investor rights agreement (the “
Investor Rights Agreement
”) whereby
the Company agreed that within sixty days of its execution, the Company shall set the number of directors on its Board of Directors
at seven and Lateral shall be entitled to nominate one of such seven directors.
The
foregoing descriptions of the Credit Agreement Amendment, form of Warrant, Registration Rights Agreement and Investor Rights Agreement
does not purport to be complete and are qualified in its entirety by reference to the full text of the same, copies of which are
filed herewith as Exhibits 10.1, 4.1, 10.2 and 10.3, respectively.
Note
Amendments Summary
The
Series A Notes and Series B Notes were amended to extend the maturity date to July 30, 2021 and to amend the interest rate to
8% per annum to be paid in kind until the borrowings under the Credit Agreement are repaid in full. The Bridge Note was amended
to extend the maturity date to September 30, 2020, to capitalize the accrued interest as of July 2, 2019 and to provide for monthly
cash interest payments. Additionally, all of the Notes were amended to provide for monthly amortization payments based on available
cash flow.
The
foregoing descriptions of the amendments to the Series A Notes, Series B Notes and Bridge Note does not purport to be complete
and are qualified in its entirety by reference to the full text of the same, copies of which are filed herewith as Exhibits 10.4,
10.5 and 10.6.
As consideration for amending
and restating the Notes, the Company entered into subscription agreements (the “
Subscription Agreements
”) pursuant
to which it issued to the Benchmark Sellers an aggregate of 1,951 shares of the Company’s Series A Preferred Stock and 296
shares of the Company’s Series A-1 Preferred Stock (collectively, the “
Series A Preferred
”), which the
Benchmark Sellers immediately exchanged, pursuant to exchange agreements (the “
Exchange Agreements
”), for an
aggregate of 100 shares of a new series of preferred stock (the “
Series H Preferred
,” and together with the
Series A Preferred, the “
Preferred Stock
”). The Series H Preferred has no dividend rights, no liquidation preference,
is not convertible and has perpetual voting rights equivalent to 51% of the total number of votes that may be cast by all outstanding
shares of capital stock of the Company. As previously announced, on June 14, 2019, the NYSE American LLC (the “
Exchange
”)
granted the Company’s request to rely on an exception to the shareholder approval requirements otherwise applicable
to the issuance of the Series A Preferred and Series H Preferred.
The
foregoing descriptions of the amendments to the Subscription Agreements and Exchange Agreements does not purport to be complete
and are qualified in its entirety by reference to the full text of the forms of the same, copies of which are filed herewith as
Exhibits 10.7 and 10.8.