Item
1.01
|
Entry
into a Material Definitive Agreement.
|
Purchase
Agreement Amendment
Changes
to the Purchase Price
On
the Closing Date and in conjunction with the completion of the acquisition of the Benchmark Shares, FTE Networks, Benchmark, and
the Sellers, entered into the Purchase Agreement Amendment in order to address certain changes in the purchase price as set forth
in the Purchase Agreement. As described in FTE Networks’ Current Report on Form 8-K filed with filed with the Securities
and Exchange Commission (the “SEC”) on March 9, 2017, the Purchase Agreement provided that the consideration to the
Sellers for the Benchmark Shares would consist of (i) $55,000,000 in cash consideration, (ii) an aggregate of 17,825,350 shares
of the Company’s common stock, and (iii) promissory notes in the aggregate amount of $10,000,000 to the Sellers. The Purchase
Agreement Amendment has, inter alia, modified the purchase price set forth in the Purchase Agreement to consist of (i) cash consideration
of approximately $17,250,000, subject to certain prospective working capital adjustments (the “Cash Consideration”),
(ii) 26,738,445 shares of FTE Networks’ common stock (the “FTE Shares”), (iii) convertible promissory notes
in the aggregate principal amount of $12,500,000 to certain stockholders of Benchmark (the “Series A Notes”), (iv)
promissory notes in the aggregate principal amount of $30,000,000 to certain stockholders of Benchmark (the “Series B Notes”)
and (v) promissory notes in the aggregate principal amount of $7,500,000 to certain stockholders of Benchmark (the “Series
C Notes” and together with the Series A Notes and the Series B Notes, the “Notes”) in the Amended Purchase Agreement.
Benchmark
Stockholders’ Representation on the FTE Networks Board of Directors
Pursuant
to the Amended Purchase Agreement, FTE Networks is required to take certain steps to appoint or use its reasonable best efforts
to ensure that Fred Sacramone, a stockholder of Benchmark, is elected to FTE Networks’ board of directors (the “Board”)
following its 2017 annual meeting. FTE Networks is also required to allow Brian McMahon, a stockholder of Benchmark, or his designee
to act as an observer to the Board until the satisfaction of the Series B Note he holds.
The
foregoing description of the Purchase Agreement Amendment and the Amended Purchase Agreement does not purport to be complete and
is qualified in its entirety by reference to the Stock Purchase Agreement, which was filed as Exhibit 10.1 to FTE Networks’
Current Report on Form 8-K on March 9, 2017, and is incorporated by reference herein, and the Purchase Agreement Amendment, which
is filed as Exhibit 10.1 to this Current Report on Form 8-K.
Registration
Rights Agreement
On
the Closing Date, FTE Networks and the Sellers entered into a Registration Rights Agreement (the “Registration Rights Agreement”).
Pursuant to the terms of the Registration Rights Agreement, FTE Networks is required to file a registration statement on Form
S-1 with the SEC for the FTE Shares on or before the later of (i) 90 calendar days following the Closing Date or (ii) 45 calendar
days following the completion of FTE Networks’ 2016 fiscal year end audits and use commercially reasonable efforts to cause
such registration statement to become effective within 120 days of its filing. FTE Networks is also obligated upon the demand
of any holder of 30% or more of the FTE shares then outstanding, to register such FTE Shares not already registered under an effective
registration statement, on Form S-3, subject to certain conditions including FTE Networks becoming eligible to use Form S-3.
The
foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by
reference to the Registration Rights Agreement, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated
herein by reference.
Credit
Facility
Pursuant
to the Amended Purchase Agreement and concurrent with the signing of the Purchase Agreement Amendment on the Closing date, FTE
Networks entered into Amendment No 3 (the “Credit Agreement Amendment”) to that certain existing credit agreement,
by and among with Jus-Com, Inc., an Indiana corporation and subsidiary of FTE Networks, certain Credit Parties (as defined therein),
Lateral Juscom Feeder LLC ( “Lateral”) and the several lenders party thereto dated October 28, 2015 (together with
the Credit Agreement Amendment, the “Amended Credit Agreement”) to provide $11,000,000 in additional term loans (together
with all other term loans made under the Amended Credit Agreement the “Term Loans”) as financing for the cash consideration
paid to the Sellers. The Term Loans mature on March 31, 2019 and bear an interest rate of 16% per annum (unless after April 28,
2017 FTE Networks has not received cash proceeds of 5,000,000 or more from an equity issuance after the Closing Date, during which
time the interest rate shall be 19%). The Amended Credit Agreement provides, inter alia, that the Term Loans will be secured by
all of the assets of FTE Networks and its subsidiaries and, subject to certain conditions, senior to its existing debt including
the Notes. The Amended Credit Agreement also provides that Lateral receive shares of FTE Networks’ common stock representing
10% of the outstanding common stock (and securities convertible into common stock) on a fully diluted basis as of the Closing
Date, including all issuances under the Amended Purchase Agreement (the “Credit Agreement Shares”).
The
foregoing description of the Amended Credit Agreement does not purport to be complete and is qualified in its entirety by reference
to (i) the Credit Agreement, which was filed as Exhibit 10.1 to FTE Networks’ Current Report on Form 8-K on November 3,
2015, and is incorporated by reference herein, (ii) the Credit Agreement Amendment which is filed as Exhibit 10.3 to this Current
Report on Form 8-K and incorporated herein by reference and (iii) FTE Networks’ Current Reports on Form 8-K filed with the
SEC on November 3, 2015, November 17, 2015 and December 4, 2015.