PREFERRED STOCK PURCHASE AGREEMENT
This
Preferred Stock Purchase Agreement (this “Agreement”) is made as of May 4,
2018, by and among FUSION
CONNECT, INC., f/k/a
Fusion Telecommunications International, Inc., a Delaware
corporation with its principal office at 000 Xxxxxxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (the “Company”), and Xxxxxxxx X. Xxxxx,
Xx.(the “Purchaser”).
Recitals
A. The
Company has authorized the sale and issuance of 15,000 shares (the
“Shares” or
“Securities”)
of Series D Cumulative Preferred Stock of the Company, $0.01 par
value per share (the “Preferred Stock”), to the Purchaser in a
private placement (the “Offering”).
B. The
Company has created or will create the Preferred Stock by filing a
Certificate of Designations and Preferences relating to the
Preferred Stock (the “Certificate of Designations”)
with the Secretary of State of the State of Delaware (the
“Secretary of
State”) in substantially the form annexed hereto as
Exhibit A,
contemporaneously with this execution and delivery of this
Agreement.
C. Pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506(b) promulgated thereunder, the
Company desires to sell to the Purchaser, and the Purchaser desires
to purchase from the Company, the Shares on the terms and subject
to the conditions set forth in this Agreement.
Terms and Conditions
Now,
therefore, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties,
intending to be legally bound, do hereby agree as
follows:
1. Purchase
of the Securities.
1.1 Agreement
to Sell and Purchase. At the Closing (as hereinafter
defined), the Company will issue and sell to the Purchaser, and the
Purchaser will purchase from the Company, the Shares for an
aggregate purchase price of $14,700,000 (the “Purchase Price”) or $980.00 for
each Share.
1.2 Closing;
Closing Date. The completion of the sale and purchase of the
Shares (the “Closing”) shall be held
simultaneously with the execution of this Agreement, or at such
other time as the Company and the Purchaser may agree (the
“Closing
Date”).
1.3 Delivery
of the Shares. At the Closing, subject to the terms and
conditions hereof, the Company will deliver to the Purchaser a
stock certificate or certificates, in such denominations and
registered in such name(s) as the Purchaser may designate by notice
to the Company, representing the Securities, or at the
Purchaser’s request, a statement or other written evidence
that the Securities issuable to the Purchaser have been issued and
are held in book entry form, in either case dated as of the Closing
Date (each such certificate and each such book entry position are
hereinafter referred to as a “Certificate”), against payment of
the Purchase Price in cash in the form of a wire transfer, unless
other means of payment shall have been agreed upon by the Purchaser
and the Company.
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2. Representations
and Warranties of the Company. The Company hereby represents
and warrants to the Purchaser, after giving effect (unless
otherwise specified below) to the consummation of the merger
between Fusion BCHI Acquisition LLC, a Delaware limited liability
company and a wholly-owned subsidiary of the Company,
with Birch
Communications Holdings, Inc. (“Birch”) and the transactions
related thereto being consummated substantially simultaneously with
this Offering (the “Merger”), and, as applicable,
based in part on information relating to Birch and its direct and
indirect subsidiaries as provided by Birch to the Company in
connection with the Merger Agreement (as defined below) and
subsequent thereto, and without making any representations or
warranties as to any subsidiaries acquired as part of the
Merger:
2.1 Authorization.
All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, has been taken. The
Company has the requisite corporate power to enter into this
Agreement and carry out and perform its obligations under this
Agreement. At the Closing, the Company will have the requisite
corporate power to issue and sell the Securities. This Agreement
has been duly authorized, executed and delivered by the Company
and, upon due execution and delivery by the Purchaser, this
Agreement will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except as rights to indemnity hereunder may be limited by federal
or state securities laws and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally or by
equitable principles.
2.2 No
Conflict with Other Instruments. The execution, delivery and
performance of this Agreement, the issuance and sale of the
Securities to be sold by the Company hereunder and the consummation
of the actions contemplated by this Agreement will not (A) result
in any violation of, be in conflict with, or constitute a default
under, with or without the passage of time or the giving of notice:
(i) any provision of the Company’s charter documents as in
effect on the date hereof or at the Closing (in each case, as
amended to include the Certificate of Designations); (ii) any
provision of any judgment, arbitration ruling, decree or order to
which the Company or its subsidiaries are a party or by which they
are bound; (iii) any bond, debenture, note or other evidence of
indebtedness, or any lease, contract, mortgage, indenture, deed of
trust, loan agreement, joint venture or other agreement, instrument
or commitment to which the Company or any subsidiary is a party or
by which they or their respective properties are bound; or (iv) any
statute, rule, law or governmental regulation or order applicable
to the Company or any of its subsidiaries, except, in the case of
(ii), (iii) and (iv) above, as would not reasonably be expected to
have a Material Adverse Effect (as hereinafter defined); or (B)
result in the creation or imposition of any lien, encumbrance,
claim, security interest or restriction whatsoever upon any of the
properties or assets of the Company or any subsidiary or any
acceleration of indebtedness pursuant to any obligation, agreement
or condition contained in any bond, debenture, note or any other
evidence of indebtedness or any indenture, mortgage, deed of trust
or any other agreement or instrument to which the Company or any
subsidiary are a party or by which they are bound or to which any
of the property or assets of the Company or any subsidiary is
subject. No consent, approval, authorization or other order of, or
registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body is required for
the execution and delivery of this Agreement by the Company and the
valid issuance or sale of the Securities by the Company pursuant to
this Agreement, other than such as have been made or obtained and
that remain in full force and effect, and except for the filing of
the Certificate of Designations or a Form D or any filings required
to be made under state securities laws.
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2.3 Certificate
of Incorporation; Bylaws. The Company has made available to
the Purchaser true, correct and complete copies of the Certificate
of Incorporation and Bylaws of the Company, as in effect on the
date hereof.
2.4 Organization,
Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now
conducted. The Company and each of its subsidiaries has full power
and authority to own, operate and occupy its properties and to
conduct its business as presently conducted and is duly qualified
to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would not reasonably be expected
to have a material adverse effect on its or its subsidiaries’
business, financial condition, properties, operations, prospects or
assets or its ability to perform its obligations under this
Agreement (a “Material
Adverse Effect”).
2.5 SEC
Filings; Financial Statements. As used herein, the
“Company SEC
Documents” means all reports, schedules, forms,
statements and other documents filed or furnished, as applicable,
by the Company under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), including pursuant to Section 13(a) or 15(d)
thereof, including the exhibits thereto and documents incorporated
by reference therein. The Company has filed all SEC Documents as
required on a timely basis and as of their respective filing dates
during the 12 months preceding the date hereof; the Company SEC
Documents since December 31, 2015 complied in all material respects
with the requirements of the Exchange Act and the rules and
regulations of the Securities and Exchange Commission (the
“SEC”)
promulgated thereunder; and none of these Company SEC Documents,
when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made not misleading. The
consolidated financial statements contained in the Company SEC
Documents since December 31, 2017: (i) complied in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
covered, except in the case of unaudited statements as permitted by
Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end
audit adjustments; and (iii) fairly present the consolidated
financial position of the Company and its subsidiaries as of the
respective dates thereof and the consolidated results of operations
cash flows and the changes in shareholders’ equity of the
Company and its subsidiaries for the periods covered
thereby.
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2.6 Capitalization.
The authorized capital stock of the Company, consists of (i)
150,000,000 shares of common stock, par value $0.01 per share, of
the Company (the “Common
Stock”), of which (A) 76,583,701 shares were issued
and outstanding as of the date of this Agreement, and (B) 8,526,403
shares were reserved for issuance upon the exercise or conversion,
as the case may be, of outstanding options, warrants or other
convertible securities as of the date of this Agreement, in each
case, taking into account the reverse split of the Common Stock
that was effected on the date hereof and acknowledging rounding
adjustments for fractional split amounts; and (ii) 10,000,000
shares of preferred stock, of which 15,000 will be issued and
outstanding as of the date of this Agreement (taking into effect
this Offering). All issued and outstanding shares of capital stock
have been duly authorized and validly issued, are fully paid and
non-assessable, have been issued and sold in compliance with the
registration requirements of the federal and state securities laws
or the applicable statutes of limitation have expired, and were not
issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. Except as set forth herein,
in the Certificate of Designations or in the Company SEC Documents
or contemplated by the Agreement and Plan of Merger (the
“Merger
Agreement”) relating to the Merger that is being
consummated contemporaneously with this Offering, there are no (i)
outstanding rights (including, without limitation, preemptive
rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any unissued shares of capital stock or
other equity interest in the Company, or any contract, commitment,
agreement, understanding or arrangement of any kind to which the
Company or any subsidiary is a party and relating to the issuance
or sale of any capital stock or convertible or exchangeable
security of the Company or any subsidiary, other than 1,996,754
options granted to directors and employees of the Company and its
subsidiaries pursuant to its 1998 Stock Option Plan, 2009 Stock
Option Plan or the 2016 Equity Incentive Plan and 1,193,070
warrants that are issued and outstanding; or (ii) obligations of
the Company to purchase redeem or otherwise acquire any of its
outstanding capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof. Except
as disclosed in the Company SEC Documents and as contemplated by
(i) the Merger Agreement, (ii) the Company’s announced
agreement to acquire, through a merger, a specified target company
(the “Acquisition
Agreement”), and (iii) the Company’s common
stock purchase agreement pursuant to which the Company will sell
$5,000,000 of Common Stock contemporaneously with the closing of
the Merger (the “Common
Stock Purchase Agreement”), there are no anti-dilution
or price adjustment provisions, co-sale rights, registration
rights, rights of first refusal or other similar rights contained
in the terms governing any outstanding security of the Company that
will be triggered by the issuance of the Securities and no person
has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company (other than the
rights which have been granted in connection with this Agreement,
the Merger Agreement, the Acquisition Agreement and the Common
Stock Purchase Agreement).
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2.7 Subsidiaries.
Except as contemplated by the Merger Agreement and except as set
forth in the Company SEC Documents, the Company does not presently
own or control, directly or indirectly, and has no stock or other
interest as owner or principal in, any other corporation or
partnership, joint venture, association or other business venture
or entity (each a “subsidiary”). Each subsidiary is
duly incorporated or organized, validly existing and, if applicable
to the jurisdiction, in good standing under the laws of its
jurisdiction of incorporation or organization and has all requisite
power and authority to carry on its business as now conducted. Each
subsidiary is duly qualified to transact business and is in good
standing in each jurisdiction, except where the failure to be so
qualified or in good standing would not have a Material Adverse
Effect. All of the outstanding capital stock or other securities of
each subsidiary of the Company is owned, either directly or
indirectly by the Company). Except for the liens granted under the
terms of the First Lien Credit Facility (as defined below) and the
Second Lien Credit Facility (as defined below), the capital stock
or other securities of each US subsidiary of the Company is free
and clear of any liens, claims or encumbrances.
2.8 Valid
Issuance of Securities. The Securities are duly authorized
and, when issued, sold and delivered and paid for in accordance
with the terms hereof will be duly and validly authorized and
issued, fully paid and non-assessable, free from all taxes, liens,
claims, encumbrances and charges with respect to the issue thereof;
provided, however, that the Securities will be subject to
restrictions on transfer under state and/or federal securities laws
or as otherwise set forth herein or in the Certificate of
Designations. The issuance, sale and delivery of the Securities in
accordance with the terms hereof will not be subject to preemptive
rights of shareholders of the Company.
2.9 Offering.
Assuming the accuracy of the representations of the Purchaser in
Section 3.3 of this Agreement on the date hereof, the offer, issue
and sale of the Securities are and will be exempt from the
registration and prospectus delivery requirements of the Securities
Act and have been or will be registered or qualified (or are or
will be exempt from registration and qualification) under the
registration, permit or qualification requirements of all
applicable state securities laws. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that
would require registration under the Securities Act of the issuance
of the Securities to the Purchaser. Other than the Company SEC
Documents, the Company has not distributed any offering materials
in connection with the offering and sale of the Securities. The
Company has not taken any action to sell, offer for sale or solicit
offers to buy any securities of the Company which would bring the
offer, issuance or sale of the Securities within the provisions of
Section 5 of the Securities Act, unless such offer, issuance or
sale was or shall be within the exemptions of Section 4 of the
Securities Act.
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2.10 Litigation.
Except as set forth in the Company SEC Documents or as set forth in
Schedule 2.10,
there is no litigation matter currently threatened against the
Company or any of its subsidiaries that (a) if adversely determined
would reasonably be expected to have a Material Adverse Effect or
(b) would be required to be disclosed in the Company’s Annual
Report on Form 10-K under the requirements of Item 103 of
Regulation S-K. The foregoing includes, without limitation, any
action, suit, proceeding or investigation, pending or threatened,
that questions the validity of this Agreement or the right of the
Company to enter into this Agreement and perform its obligations
hereunder. Except as set forth in Schedule 2.10, neither the
Company nor any subsidiary is subject to any injunction, judgment,
decree or order of any court, regulatory body, arbitral panel,
administrative agency, national securities exchange or other
government body. To the Company’s knowledge, there is no
proceeding or investigation by the Principal Market (as defined
below) pending that could lead to a suspension of listing or
trading of the Common Stock.
2.11 Governmental
Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing
with, any federal, state, local or provincial governmental
authority on the part of the Company or any of its subsidiaries is
required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing of the
Certificate of Designations and notices required or permitted to be
filed with the Principal Market or certain state and federal
securities commissions, which notices will be filed on a timely
basis.
2.12 No
Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder’s or other fee or commission in
connection with the transactions contemplated by this Agreement
based on arrangements made by the Company, it being expressly
acknowledged that any fees payable in connection with the
consummation of the Merger substantially simultaneously with this
Offering are not fees to any broker, finder, underwriter or
placement agent for services in connection with this
Offering.
2.13 Compliance.
Neither the Company nor any of its subsidiaries is in violation of
its Certificate of Incorporation or Bylaws (or similar
organizational documents). The Company and its subsidiaries, and
their representatives, have been conducting their business in
compliance with all applicable laws, rules and regulations of the
jurisdictions in which they conduct business, including, without
limitation, all applicable local, state and federal environmental
laws and regulations, except where failure to be so in compliance
would not have a Material Adverse Effect. Each of the Company and
its subsidiaries has all necessary franchises, licenses, permits,
certificates and other authorizations from any foreign, federal,
state or local government or governmental agency, department or
body that are currently necessary for the operation of the business
of the Company and its subsidiaries as currently conducted, except
where the failure to currently possess such franchises, licenses,
certificates and other authorizations would not reasonably be
expected to have a Material Adverse Effect.
2.14 No
Material Changes. Except as disclosed in the Company SEC
Documents and except for the completion of the Merger and the entry
by the Company into a $595 million first lien credit facilities
(the “First Lien Credit
Facility”) and the $85 million second lien credit
facility (the “Second Lien
Credit Facility”) and the various
transactions contemplated by each of these credit facilities, since
December 31, 2017, there has been no material adverse change in the
assets, liabilities, business, properties, operations, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole.
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2.15 Intellectual
Property.
(a) The
Company and each of its subsidiaries has ownership or license or
legal right to use, or can acquire on reasonable terms, all patent,
copyright, trade secret, know-how trademark, trade name customer
lists, designs, manufacturing or other processes, computer
software, systems, data compilation, research results or other
proprietary rights used in the business of the Company or such
subsidiary (collectively “Intellectual Property”), except
as such failure to own, license, use or acquire would not result in
a Material Adverse Effect.
(b) The
Company and each of its subsidiaries has taken all reasonable steps
required in accordance with sound business practice and business
judgment to establish and preserve its ownership of all material
Intellectual Property with respect to their products and
technology.
(c) To
the knowledge of the Company, the present business, activities and
products of the Company and its subsidiaries do not infringe any
intellectual property of any other person, except or where such
infringement would not have a Material Adverse Effect. Except as
set forth in Schedule
2.15(c), no proceeding charging the Company or any of its
subsidiaries with infringement of any adversely held Intellectual
Property is currently pending. To the knowledge of the Company, no
other person is infringing any rights of the Company or its
subsidiaries to the Intellectual Property.
(d) Except
as set forth in Schedule
2.15(c), no proceedings are pending or, to the knowledge of
the Company, threatened, which challenge the rights of the Company
or any of its subsidiaries to the use of the Intellectual Property.
To the knowledge of the Company, the Company and each of its
subsidiaries has the right to use, free and clear of material
claims or rights of other persons, all of its customer lists,
designs, computer software, systems, data compilations, and other
information that are required for its products or its business as
presently conducted. To the knowledge of the Company, neither the
Company nor any of its subsidiaries is making unauthorized use of
any confidential information or trade secrets of any person. The
activities of any of the employees on behalf of the Company or of
any of its subsidiaries do not violate any agreements or
arrangements between such employees and third parties related to
confidential information or trade secrets of third parties or that
restrict any such employee’s engagement in business activity
of any nature.
(e) All
material licenses or other agreements under which (i) the Company
or any subsidiary employs rights in Intellectual Property, or (ii)
the Company or any subsidiary has granted rights to others in
Intellectual Property owned or licensed by the Company or any
subsidiary are in full force and effect, and there is no default
(and there exists no condition which, with the passage of time or
otherwise, would constitute a default by the Company or such
subsidiary) by the Company or any subsidiary of the Company with
respect thereto.
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2.16 Accountants.
EisnerAmper LLP, who expressed their opinion with respect to the
consolidated financial statements contained in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2017,
have advised the Company that they are, and to the knowledge of the
Company they are, independent accountants as required by the
Securities Act and the rules and regulations promulgated
thereunder.
2.17 Taxes.
The Company and each of its subsidiaries has filed all federal,
state, local and foreign income and franchise tax returns and has
paid all taxes shown as due thereon (except where the failure to
file would not have a Material Adverse Effect). The Company has set
aside on its books adequate provisions for payments of taxes as of
its reporting period.
2.18 Insurance.
The Company and each of its subsidiaries maintains and will
continue to maintain insurance of the types and in the amounts that
the Company reasonably believes is adequate for its business,
including, but not limited to, insurance covering real and personal
property owned or leased by the Company and its subsidiaries
against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against by similarly situated companies,
all of which insurance is in full force and effect.
2.19 Transfer
Taxes. On the Closing Date, all stock transfer or other
taxes (other than income taxes) that are required to be paid in
connection with the sale and transfer of the Securities hereunder
will be, or will have been, fully paid or provided for by the
Company and the Company will have complied with all laws imposing
such taxes.
2.20 Investment
Company. The Company (including its subsidiaries) is not an
“investment company” or an “affiliated
person” of, or “promoter” or “principal
underwriter” for an investment company, within the meaning of
the Investment Company Act of 1940 and will not be deemed an
“investment company” as a result of the transactions
contemplated by this Agreement.
2.21 Related
Party Transactions. To the knowledge of the Company, no
transaction has occurred between or among the Company or any of its
affiliates (including, without limitation, any of its
subsidiaries), officers or directors or any affiliate or affiliates
of any such affiliate, officer or director that with the passage of
time will be required to be disclosed pursuant to Section 13, 14 or
15(d) of the Exchange Act other than those transactions that have
already been so disclosed in the SEC Documents and those
transactions that are in connection with, or contemplated by, the
Merger, the First Lien Credit Facility and the Second Lien Credit
Facility (including the sale of Shares hereunder).
2.22 Books
and Records. The books, records and accounts of the Company
and its subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions in, and dispositions of, the assets of,
and the operations of, the Company and its
subsidiaries.
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2.23 Disclosure
Controls and Internal Controls.
(a) The
Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 under the
Exchange Act), which (i) are designed to ensure that material
information relating to the Company is made known to the
Company’s principal executive officer and its principal
financial officer by others within the Company particularly during
the periods in which the periodic reports required under the
Exchange Act are being prepared; and (ii) provide for the periodic
evaluation of the effectiveness of such disclosure controls and
procedures as of the end of the period covered by the
Company’s most recent annual or quarterly report filed with
the SEC.
(b) 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 generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets
or incurrence of liabilities is permitted only in accordance with
management’s general or specific authorization and (iv) the
recorded accountability for assets and liabilities is compared with
the existing assets and liabilities at reasonable intervals and
appropriate action is taken with respect to any difference. The
Company maintains disclosure controls and procedures (as such term
is defined in Rule 13a-14 under the Exchange Act) that are
effective in ensuring that information required to be disclosed by
the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the Company’s
management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to
allow timely decisions regarding required disclosure. The Company
is not aware of (i) any significant deficiency or material weakness
in the design or operation of its internal controls; or (ii) any
fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s or any
of its subsidiary’s internal controls.
(c) Except
as described in the Company SEC Documents, there are no material
off-balance sheet arrangements (as defined in Item 303 of
Regulation S-K), or any other relationships with unconsolidated
entities (in which the Company or its control persons have an
equity interest) that may have a material current or future effect
on the Company’s or any of its/subsidiary’s financial
condition, revenues or expenses, changes in financial condition,
results of operations, liquidity, capital expenditures or capital
resources.
2.24 No
General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D promulgated under the
Securities Act) in connection with the offer or sale of the
Securities.
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2.25 Foreign
Corrupt Practices. Neither the Company nor any of its
subsidiaries nor any director, officer, agent, employee or other
person acting on behalf of the Company or any of its subsidiaries
has, in the course of its actions for, or on behalf of, the Company
(i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; (iii) violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government
official or employee.
2.26 Xxxxxxxx-Xxxxx
Act. The Company is in compliance in all material respects
with any and all applicable requirements of the Xxxxxxxx-Xxxxx Act
of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the SEC thereunder
that are effective as of the date hereof.
2.27 Employee
Relations. Neither the Company nor any of its subsidiaries
is a party to any collective bargaining agreement. The Company
reasonably believes that its and its subsidiaries’ relations
with its employees are good. Other than as disclosed in the
Company’s Form 14F-1 filed with the SEC, no executive officer
of the Company (as defined in Rule 501(f) of the Securities Act)
has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer’s employment with
the Company. To the knowledge of the Company, no executive officer
of the Company is, or is expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive
officer does not subject the Company to any liability with respect
to any of the foregoing matters. The Company and each of its
subsidiaries is in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse
Effect.
2.28 Disclosure
of Information. The Company confirms that, to its knowledge,
with the exception of the proposed sale of Securities as
contemplated herein (as to which the Company makes no
representation under this Section 2.28) and information
provided with respect to the Merger, the Acquisition Agreement, the
Common Stock Purchase Agreement, the First Lien Credit Facility and
the Second Lien Credit Facility, neither it nor any other person
acting on its behalf has provided the Purchaser or its agents or
counsel with any information that constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the
Company. All disclosures provided to the Purchaser regarding the
Company, its business and the transactions noted in this Section
2.28 furnished by the Company are true and correct and do not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading.
-10-
2.29 Forward-Looking
Information. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act) made by the Company or any of its officers or
directors contained in the SEC Documents, or made available to the
public generally since December 31, 2017, has been made or
reaffirmed without a reasonable basis or has been disclosed other
than in good faith.
2.30 No
“Bad Actor” Disqualification. The Company has
exercised reasonable care, in accordance with SEC rules and
guidance, and has conducted a factual inquiry, the nature and scope
of which reflect reasonable care under the relevant facts and
circumstances, to determine whether any Covered Person (as defined
below) is subject to any of the “bad actor”
disqualifications described in Rule 506(d)(1)(i) to (viii) under
the Securities Act (“Disqualification Events”). To the
Company’s knowledge, after conducting such sufficiently
diligent factual inquiries, no Covered Person is subject to a
Disqualification Event, except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3) under the Securities Act. The Company
has complied, to the extent applicable, with any disclosure
obligations under Rule 506(e) under the Securities Act.
“Covered
Persons” are those persons specified in Rule 506(d)(1)
under the Securities Act, including the Company; any predecessor or
affiliate of the Company; any director, executive officer, other
officer participating in the offering, general partner or managing
member of the Company; any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power; any promoter (as defined in Rule 405
under the Securities Act) connected with the Company in any
capacity at the time of the sale of the Securities; and any person
that has been or will be paid (directly or indirectly) remuneration
for solicitation of purchasers in connection with the sale of the
Securities (a “Solicitor”), any general partner
or managing member of any Solicitor, and any director, executive
officer or other officer participating in the offering of any
Solicitor or general partner or managing member of any
Solicitor.
3. Representations
and Warranties of the Purchaser. The Purchaser hereby represents and
warrants to the Company as follows:
3.1 Legal
Power. The Purchaser has the requisite power and authority
to enter into this Agreement and to carry out and perform its
obligations under the terms of this Agreement. All action on the
Purchaser’s part required for the lawful execution and
delivery of this Agreement have been or will be effectively taken
prior to the Closing.
3.2 Due
Execution. This Agreement has been duly authorized, executed
and delivered by the Purchaser, and, upon due execution and
delivery by the Company, this Agreement will be a valid and binding
agreement of the Purchaser, except as rights to indemnity hereunder
may be limited by federal or state securities laws and except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors’ rights generally or by equitable
principles.
3.3 Investment
Representations. In connection with the sale and issuance of
the Securities, the Purchaser makes the following
representations:
-11-
(a) Investment
for Own Account. The Purchaser is acquiring the Securities
for its own account, not as nominee or agent, and not with a view
to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities
Act; provided,
however, that by making the representations herein, the Purchaser
does not agree to hold any of the Securities for any minimum or
specific term and reserves the right to dispose of the securities
at any time in accordance with or pursuant to a registration
statement or an exemption from the registration requirements of the
Securities Act.
(b) Transfer
Restrictions; Legends. The Purchaser understands that (i)
the Securities have not been registered under the Securities Act;
(ii) the Securities are being offered and sold pursuant to an
exemption from registration, based in part upon the Company’s
reliance upon the statements and representations made by the
Purchaser in this Agreement, and that the Securities must be held
by the Purchaser indefinitely, and that the Purchaser must,
therefore, bear the economic risk of such investment indefinitely,
unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration; (iii) each
Certificate representing Securities will be endorsed or notated
with substantially the following legend until the date the Shares
are eligible for sale without restriction or limitation under Rule
144 under the Securities Act or any successor rule
(“Rule
144”):
THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES
ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. UNLESS SOLD
PURSUANT TO EITHER AN EFFECTIVE REGISTRATION STATEMENT OR RULE 144
UNDER THE SECURITIES ACT, THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
(iv) the Company will instruct any
transfer agent not to register the transfer of the Securities (or
any portion thereof) until the applicable date set forth in clause
(iii) above unless (A) the conditions specified in the foregoing
legends are satisfied, (B) if the opinion of counsel referred to
above is to the further effect that such legend is not required in
order to establish compliance with any provisions of the Securities
Act or this Agreement, (C) if the Purchaser provides the Company
with reasonable assurance, such as through a representation letter,
that the Securities may be sold pursuant to Rule 144 under the
Securities Act, or (D) other reasonably satisfactory assurances of
such nature are given to the Company. If so required by the
Company’s transfer agent, the Company shall cause its counsel
to issue and deliver a legal opinion to the transfer agent to
effect the removal of the restrictive legend contemplated by this
Agreement.
-12-
The Company acknowledges and agrees
that the Purchaser may from time to time pledge, and/or grant a
security interest in some or all of the Securities pursuant to a
bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or
account, the Purchaser may transfer pledged or secured Securities
to the pledgees or secured parties. Such a pledge or transfer shall
not be subject to approval or consent of the Company and no legal
opinion of legal counsel to the pledgee, secured party or pledgor
shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer
following default by the Purchaser transferee of the pledge. No
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities.
Certificates evidencing the Shares
shall not contain any restrictive legend (including the legend set
forth in this Section): (i) following a resale of the Shares under
an effective registration statement covering the Shares, or (ii)
following a sale of such Shares pursuant to Rule 144, or (iii)
while such Shares are eligible for sale under Rule 144 and, with
respect to the Shares, the Purchaser is not and has not been for
three months an affiliate of the Company (as such term is defined
in Rule 144(a)(1)) and such Shares have been held for one year or
more pursuant to the requirements of Rule 144 and any other
requirements under Rule 144 have been satisfied at such time, or
(iv) if such legend is not required under applicable requirements
of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the SEC). Following such time
as restrictive legends are not required to be placed on
Certificates representing Shares, the Company will, no later than
three business days following the delivery by the Purchaser to the
Company or the Company’s transfer agent of a Certificate
representing Shares containing a restrictive legend and such other
documentation and representations as the Company, its legal counsel
or any transfer agent may reasonably request to confirm compliance
with the preceding sentence as applicable (provided, however, that
neither the Company nor its legal counsel will require a legal
opinion in connection with any sale pursuant to Rule 144), deliver
or cause to be delivered to the Purchaser a Certificate
representing such Shares that is free from all restrictive legends.
The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section.
The Purchaser agrees that the
removal of the restrictive legend from Certificates representing
Shares as set forth in this Section 3.3(b) is predicated upon the
Company’s reliance that the Purchaser will sell any Shares
pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or
an exemption therefrom.
(c) Financial
Sophistication; Due Diligence. The Purchaser has such
knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment in
connection with the transactions contemplated in this Agreement.
The Purchaser has, in connection with its decision to purchase the
Securities, relied only upon the representations and warranties
contained herein and the information contained in the Company SEC
Documents. Further, the Purchaser has had such opportunity to
obtain additional information and to ask questions of, and receive
answers from, the Company, concerning the terms and conditions of
the investment and the business and affairs of the Company, as the
Purchaser considers necessary in order to form an investment
decision.
-13-
(d) Accredited
Investor Status. The Purchaser is an “accredited
investor” as such term is defined in Rule 501(a) of the rules
and regulations promulgated under the Securities Act.
(e) Residency.
The Purchaser is organized under the laws of the jurisdiction set
forth beneath the Purchaser’s name on the signature page
attached hereto, and its principal place of operations is in the
state set forth beneath the Purchaser’s name on the signature
page attached hereto.
(f) General
Solicitation. The Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over the television or radio
or presented at any seminar or any other general solicitation or
general advertisement.
3.4 No
Investment, Tax or Legal Advice. The Purchaser understands
that nothing in the Company SEC Documents, this Agreement, or any
other materials presented to the Purchaser in connection with the
purchase and sale of the Securities constitutes legal, tax or
investment advice. The Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of
Securities.
3.5 Additional
Acknowledgement. The Purchaser acknowledges that it has
independently evaluated the merits of the transactions contemplated
by this Agreement, that it has independently determined to enter
into the transactions
4. Conditions
to Closing.
4.1 Conditions
to Obligations of Purchaser at Closing. The
Purchaser’s obligation to purchase the Securities at the
Closing is subject to the fulfillment, on or prior to the Closing,
of all of the following conditions, any of which may be waived by
the Purchaser:
(a) Representations
and Warranties True; Performance of Obligations. The
representations and warranties made by the Company in Section 2
shall be true and correct in all material respects (or, where the
representation and warranty itself is qualified by materiality, it
shall be true and correct in all respects) on the Closing Date with
the same force and effect as if they had been made on and as of
said date (except to the extent that any such representation and
warranty expressly speaks as of an earlier date, in which case such
representation and warranty shall be so true and correct as of such
earlier date), and the Company shall have performed and complied
with all obligations and conditions herein required to be performed
or complied with by it on or prior to the Closing, including, but
not limited to, those obligations and conditions set forth in
Sections 4.1(c), 4.1(f), 4.1(g), 4.1(h), and 4.1(i), and if the
Closing date is subsequent to the date hereof, a certificate duly
executed by an officer of the Company, to the effect of the
foregoing, shall be delivered to the Purchaser. The delivery of
such certificate shall evidence the satisfaction of the conditions
set forth in this Section 4.1.
-14-
(b) Proceedings
and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and
all documents and instruments incident to such transactions shall
be reasonably satisfactory in substance and form to counsel to the
Purchaser, and counsel to the Purchaser shall have received all
such counterpart originals or certified or other copies of such
documents as they may reasonably request. The Company shall have
delivered (or caused to have been delivered) to the Purchaser, the
Certificate(s) required by this Agreement.
(c) Qualifications,
Legal Investment. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with
the lawful sale and issuance of the Securities shall have been duly
obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Securities shall
have been issued and no proceedings for such purpose shall be
pending or, to the knowledge of the Company, threatened by the SEC,
or any commissioner of corporations or similar officer of any state
having jurisdiction over this transaction. At the time of the
Closing, the sale and issuance of the Securities shall be legally
permitted by all laws and regulations to which the Company is
subject. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered,
promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby
which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(d) Execution
of Agreement. The Company shall have executed this Agreement
and have delivered this Agreement to the Purchaser.
(e) Certificate
of Designations. The Certificate of Designations shall have
been filed with the Secretary of State.
(f) Payment
of Closing Fee. The Company shall have delivered to the
Purchaser a closing fee of $200,000, payable by offsetting such
amount from the Purchase Price.
(g) Market
Listing. The Company will comply with all of the
requirements of the Financial Industry Regulatory Authority, Inc.
and the Nasdaq Stock Market with respect to the issuance of the
Securities.
(h) Blue
Sky. The Company shall have obtained all necessary
“blue sky” law permits and qualifications, or have the
availability of exemptions therefrom, required by any state for the
offer and sale of the Securities.
(i) Material
Adverse Change. Since the date of this Agreement, there
shall not have occurred any event which results in a Material
Adverse Effect.
(j) Merger.
The Merger and the transactions related thereto shall be
consummated in accordance with the Merger Agreement, including the
financings contemplated by the First Lien Credit Facility and the
Second Lien Credit Facility, contemporaneously with the
Offering.
-15-
4.2 Conditions
to Obligations of the Company. The Company’s
obligation to issue and sell the Securities at the Closing is
subject to the fulfillment, on or prior to the Closing, of the
following conditions, any of which may be waived by the
Company:
(a) Representations
and Warranties True. The representations and warranties made
by the Purchaser in Section 3 shall be true and correct in all
material respects (or, where the representation and warranty itself
is qualified by materiality, it shall be true and correct in all
respects) on the Closing Date with the same force and effect as if
they had been made on and as of said date (except to the extent
that any such representation and warranty expressly speaks as of an
earlier date, in which case such representation and warranty shall
be so true and correct as of such earlier date).
(b) Performance
of Obligations. The Purchaser shall have performed and
complied with all agreements and conditions herein required to be
performed or complied with by them on or before the Closing. The
Purchaser shall have delivered the Purchase Price, by wire
transfer, to the account designated by the Company for such
purpose.
(c) Qualifications,
Legal Investment. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with
the lawful sale and issuance of the Securities shall have been duly
obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Securities shall
have been issued and no proceedings for such purpose shall be
pending or, to the knowledge of the Company, threatened by the SEC,
or any commissioner of corporations or similar officer of any state
having jurisdiction over this transaction. At the time of the
Closing, the sale and issuance of the Securities shall be legally
permitted by all laws and regulations to which the Company is
subject. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered,
promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby
which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(d) Execution
of Agreement. The Purchaser shall have executed this
Agreement and delivered this Agreement to the Company.
(e) Merger.
The Merger and the transactions related thereto shall be
consummated in accordance with the Merger Agreement, including the
financings contemplated by the First Lien Credit Facility and the
Second Lien Credit Facility, contemporaneously with the
Offering.
4.3 Termination
of Obligations to Effect Closing; Effect.
(a) Termination.
The obligations of the Company, on the one hand, and the Purchaser,
on the other hand, to effect the Closing shall terminate as
follows:
(i) Upon the mutual written consent of the Company
and the Purchaser;
-16-
(ii) By the Company if any of the conditions set
forth in Section 4.2 shall have become incapable of fulfillment,
and shall not have been waived by the Company;
(iii) By the Purchaser if any of the conditions set
forth in Section 4.1 shall have become incapable of fulfillment,
and shall not have been waived by the Purchaser; or
(iv) By either the Company or the Purchaser if the
Closing has not occurred on or prior to May 15,
2018; provided, however, that, in the case of clause (iii)
above and clause (iv) with respect to the Company, the party
seeking to terminate its obligation to effect the Closing shall not
then be in breach of any of its representations, warranties,
covenants, or agreements contained in this Agreement if such breach
has resulted in the circumstances giving rise to such party’s
seeking to terminate its obligation to effect the
Closing.
(b) Effect
of Termination. Nothing in this Section 4.3 shall be deemed
to release any party from any liability for any breach by such
party of the terms and provisions of this Agreement or to impair
the right of any party to compel specific performance by any other
party of its obligations under this Agreement.
5. Additional
Covenants.
5.1 Reporting
Status. With a view to making available to the Purchaser the
benefits of certain rules and regulations of the SEC which may
permit the sale of the Shares to the public without registration,
the Company agrees to use its reasonable best efforts to file with
the SEC, in a timely manner, all reports and other documents
required of the Company under the Exchange Act. The Company will
otherwise take such further action as the Purchaser may reasonably
request, all to the extent required from time to time, to enable
the Purchaser to sell the Shares without registration under the
Securities Act or any successor rule or regulation adopted by the
SEC.
5.2 Protection
of Exemptions. The Company will not, for a period of six
months following the Closing Date offer for sale or sell any
securities unless, in the opinion of the Company’s counsel,
such offer or sale does not jeopardize the availability of
exemptions from the registration and qualification requirements
under applicable securities laws with respect to the Offering.
Except for the issuance of stock options under the Company’s
stock option plans, the issuance of common stock upon exercise of
outstanding options and warrants, the issuance of common stock
purchase warrants, the issuance of Common Stock pursuant to the
Merger Agreement or the Acquisition Agreement, the Common Stock
Purchase Agreement, the Company’s public offering of Common
Stock consummated on February 5, 2018 and the offering contemplated
hereby, the Company has not engaged in any offering of equity
securities during the six (6) months prior to the date of this
Agreement. The foregoing provisions of this Section 5.2 shall not
prevent the Company from filing a “shelf” registration
statement pursuant to Rule 415 under the Securities Act, but the
foregoing provisions shall apply to any sale of securities
thereunder.
-17-
5.3 Form D
and State Securities Filings. The Company will file with the
SEC a Notice of Sale of Securities on Form D with respect to
the Securities, as required under Regulation D under the
Securities Act, no later than 15 days after the Closing Date. The
Company will promptly and timely file all documents and pay all
filing fees required by any states’ securities laws in
connection with the sale of Securities.
5.4 Resale
Registration. The Company will file with the SEC the resale
registration statement (the “Resale Registration Statement”)
required in connection with the registration rights agreement being
entered into between the Company and Birch pursuant to the Merger
Agreement no later than five (5) business days after the Closing;
provided, that such timing shall be subject to the Company’s
receipt of documents and information required for filing the Resale
Registration Statement that are out of the Company’s
reasonable control on a timely basis prior to such deadline,
including, but not limited to, descriptive and other information
about Birch and its business and operations, risk factors relating
to Birch’s business and operations, input to the “Plan
of Distribution” section of the Resale Registration
Statement, the consent of the auditor of Birch’s financial
statement, and financial statements of Birch required to be filed
with or incorporated by reference into the Resale Registration
Statement (including pro forma financial statements of Birch and
Fusion on a consolidated basis). To the extent any such document or
information is not available, and out of the Company’s
reasonable control, the Company will use its reasonable best
efforts to obtain such documents and information and file the
Resale Registration Statement, as promptly as
possible.
6. Miscellaneous.
6.1 Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard
to the choice of law provisions thereof, and the federal laws of
the United States.
6.2 Successors
and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators
of the parties hereto. Notwithstanding the foregoing, the Company
may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the
Purchaser.
6.3 Entire
Agreement. This Agreement and the exhibits hereto, and the
other documents delivered pursuant hereto, constitute the full and
entire understanding and agreement among the parties with regard to
the subjects hereof and no party shall be liable or bound to any
other party in any manner by any representations, warranties,
covenants, or agreements except as specifically set forth herein or
therein. Nothing in this Agreement, express or implied, is intended
to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein.
-18-
6.4 Severability.
In the event any provision of this Agreement shall be invalid,
illegal, or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to
retain as nearly as practicable the intent of the parties, and the
validity, legality, and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
6.5 Amendment
and Waiver. Except as otherwise provided herein, any term of
this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular
instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely), with the written consent
of the Company and the Purchaser. Any amendment or waiver effected
in accordance with this Section 6.5 shall be binding upon each
future holder of any of the Securities purchased under this
Agreement and the Company.
6.6 Fees
and Expenses. Except as otherwise set forth herein, the
Company and the Purchaser shall bear their own expenses and legal
fees incurred on their behalf with respect to this Agreement and
the transactions contemplated hereby. Each party hereby agrees to
indemnify and to hold harmless of and from any liability the other
party for any commission or compensation in the nature of a
finder’s fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted
liability) for which such indemnifying party or any of its
employees or representatives are responsible.
6.7 Notices.
All notices, requests, consents and other communications hereunder
shall be in writing, shall be delivered, if within the United
States, by first-class registered or certified airmail, or
nationally recognized overnight express courier, postage prepaid,
and shall be addressed as follows, or to such other address or
addresses as may have been furnished in writing by a party to
another party pursuant to this paragraph:
●
if to the Company, to the address of the
Company’s principal office set forth on the first page of
this Agreement, Attention: Xxxxx X. Xxxxxxxx, Xx., EVP and General
Counsel, e-mail: xxxxxxxxx@xxxxxxxxxxxxx.xxx with a copy to (which
shall not constitute notice to the Company) Xxxxxx Xxxx &
Xxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Xxxxx Xxxxx Xxxxxxx, e-mail: xxxxxxxx@xxxxxxxxxx.xxx
and
●
if to the Purchaser, at its address on the
signature page to this Agreement.
6.8 Survival
of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and
warranties made by the Company and the Purchaser herein shall
survive the execution of this Agreement, the delivery to the
Purchaser of the Securities being purchased and the payment
therefor, and a party’s reliance on such representations and
warranties shall not be affected by any investigation made by such
party or any information developed thereby.
-19-
6.9 Counterparts.
This Agreement may be executed by pdf signature and in any number
of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one instrument.
6.10 Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
[The Remainder of this Page is Blank; Signature Pages
Follow]
-20-
In witness whereof, the foregoing
Preferred Stock Purchase Agreement is hereby executed as of the
date first above written.
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By:
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/s/ Xxxxx X. Xxxxxxxx,
Xx.
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Name:
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Xxxxx X. Xxxxxxxx, Xx.
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Title:
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Executive Vice President and General
Counsel
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-21-
In witness whereof, the foregoing
Preferred Stock Purchase Agreement is hereby executed as of the
date first above written.
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Xxxxxxxx X. Xxxxx,
Xx.
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Name of Investor
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By:
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/s/ Xxxxxxxx X. Xxxxx,
Xx.
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Name:
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Title:
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Tax Identification No.:
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Jurisdiction of
Organization:
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Georgia
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Jurisdiction of Principal Place of
Operations:
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Georgia
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Address for Notice:
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0000 Xxxxxxxxx Xx.,
X.X.
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Xxxxx 0000
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Xxxxxxx, Xxxxxxx
00000
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Attention: Xxxxxxxx X. Xxxxx,
Xx.
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-22-
Exhibit A
Certificate of
Designations of the Series D Cumulative Preferred
Stock
(attached)
-23-
CERTIFICATE
OF
DESIGNATION OF
PREFERENCES,
RIGHTS AND
LIMITATIONS
OF
SERIES D
CUMULATIVE PREFERRED STOCK
Pursuant to Section 151 of the
Delaware General Corporation Law and Article IV of the Amended and
Restated Certificate of Incorporation (the “Certificate of
Incorporation”) of Fusion Connect, Inc., a corporation
organized and existing under the laws of the State of Delaware (the
“Corporation”),
the Corporation hereby certifies that the following resolution was
duly adopted by the board of directors of the Corporation (the
“Board”)
effective as of May [●], 2018, pursuant to the authority
conferred upon the Board by the Certificate of Incorporation, which
authorizes the issuance of up to 10,000,000 shares of preferred
stock, par value $0.01 per share:
RESOLVED, that the designation of
100,000 shares of a new series
of preferred stock of the Corporation, designated as the Series D
Cumulative Preferred Stock, out of the authorized and unissued
shares of preferred stock, par value $0.01 per share, of the
Corporation, with the rights and preferences set forth herein, be,
and hereby is, approved:
I.
Designation and
Amount
Of the 10,000,000 shares of
preferred stock authorized pursuant to Article IV of the
Certificate of Incorporation, 100,000 are hereby designated as
Series D Cumulative Preferred Stock, par value $0.01 per share (the
“Series D Preferred
Stock”). Each share of Series D Preferred Stock shall
have a stated value of $1,000 per share (the “Stated
Value”). Subject to Article IV, such number of
shares may be increased or decreased by resolution of the Board and
by the filing of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such
reduction or increase has been so authorized; provided, however, that no decrease will
reduce the number of shares of Series D Preferred Stock to a
number less than the number of shares then outstanding, plus the
number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible
into Series D Preferred Stock.
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II.
Dividends
Dividends on each share of Series D
Preferred Stock shall accrue on a monthly basis at the rate of 12%
per annum of the sum of the Stated Value plus all accumulated and
unpaid dividends thereon from and including the date of issuance of
such share to and including the date on which the Stated Value of
such share (plus all accrued and unpaid dividends thereon) is paid
to the holder thereof in connection with a Liquidation Event (as
defined herein) or the redemption of such share by the Corporation.
Such dividends shall accrue whether or not they have been declared
and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. All
accrued and unpaid dividends on each share of Series D Preferred
Stock shall be paid, at the option of the Corporation, in cash or
in kind with shares of Series D Preferred Stock on the last
business day of each calendar month; provided that dividends may
only be paid in cash after all obligations of the Corporation and
its subsidiaries under each of the New Credit Facilities (excluding
contingent obligations as to which no claim has been made) have
been paid in full in cash, all commitments to extend credit
thereunder have been terminated and no letter of credit shall be
outstanding thereunder. For purposes of dividends paid in kind, (i)
the number of shares of Series D Preferred Stock payable in respect
thereof shall be determined using a per share price of $1,000
(adjusted appropriately for stock splits, stock dividends,
recapitalizations, consolidations, mergers and the like with
respect to the Series D Preferred Stock) and (ii) in lieu of a
fractional share of Series D Preferred Stock as a dividend, the
Corporation shall issue a whole share of Series D Preferred Stock
(rounded up to the nearest whole share).
III.
Liquidation
(a) Upon any liquidation, dissolution or winding up
of the Corporation (whether voluntary or involuntary) (a
“Liquidation
Event”), each holder of Series D Preferred Stock shall
be entitled to be paid, before any distribution or payment is made
upon any shares of Common Stock or other Junior Stock, an amount in
cash equal to the aggregate Stated Value of all shares of Series D
Preferred Stock held by such holder (plus all accrued and unpaid
dividends thereon), and the holders of Series D Preferred Stock
shall thereafter not be entitled to any further payment. If upon
any such liquidation, dissolution or winding up of the Corporation,
the Corporation’s assets to be distributed among the holders
of the Series D Preferred Stock are insufficient to permit payment
to such holders of the aggregate amount that they are entitled to
be paid under this Article
III, then the assets available to be distributed to the
holders of Series D Preferred Stock shall be distributed pro rata
among such holders based upon the aggregate Stated Value (plus all
accrued and unpaid dividends) of the Series D Preferred Stock held
by each such holder.
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(b) For purposes of this Article III, a
“Liquidation Event” shall be deemed to include, (i) the
acquisition of the Corporation by another entity by means of any
transaction or series of related transactions to which the
Corporation is party (including, without limitation, any stock
transaction, reorganization, merger or consolidation) other than a
transaction or series of related transactions in which the holders
of the voting securities of the Corporation outstanding immediately
prior to such transaction or series of related transactions retain,
immediately after such transaction or series of related
transactions, as a result of shares in the Corporation held by such
holders prior to such transaction or series of related
transactions, at least a majority of the total voting power
represented by the outstanding voting securities of the Corporation
or such other surviving or resulting entity (or if the Corporation
or such other surviving or resulting entity is a wholly-owned
subsidiary immediately following such acquisition, its parent); and
(ii) a sale, lease or other disposition of all or substantially all
of the assets of the Corporation and its subsidiaries taken as a
whole by means of any transaction or series of related
transactions, except where such sale, lease or other disposition is
to a wholly-owned subsidiary of the Corporation.
IV.
Redemptions
(a) The Corporation may at any time and from time to
time, on a pro rata basis, but only after the payment in full in
cash of the Deferred Fees, redeem all or any portion of the shares
of Series D Preferred Stock then outstanding. Upon any such
redemption, the Corporation shall pay a price per share equal to
the Stated Value thereof (plus all accrued and unpaid dividends
thereon). Such redemption shall take place on a date fixed by the
Corporation.
(b) At any time after the date that the first share
of Series D Preferred Stock is issued and at such time as any share
of Series D Preferred Stock is issued and outstanding, but only
after the payment in full in cash of the Deferred Fees, upon the
sale by the Corporation of any of its equity securities for cash,
the Corporation shall use the net cash proceeds of such sale to
redeem all the shares of Series D Preferred Stock then issued and
outstanding or, if such proceeds are less than the amount required
to redeem all such issued and outstanding shares of Series D
Preferred Stock, the maximum amount of shares of Series D Preferred
Stock that can be redeemed using such proceeds, in each case, at a
price per share equal to the Stated Value thereof (plus all accrued
and unpaid dividends thereon).
(c) The Corporation shall provide written notice of
each redemption of shares of Series D Preferred Stock to each
record holder thereof not more than 30 nor less than five days
prior to the date on which such redemption is to be
made.
(d) If less than all the shares of Series D
Preferred Stock are to be redeemed, the number of shares of Series
D Preferred Stock to be redeemed from each holder thereof shall be
the number of shares determined by multiplying the total number of
shares of Series D Preferred Stock to be redeemed by a fraction,
the numerator of which shall be the total number of shares of
Series D Preferred Stock then held by such holder and the
denominator of which shall be the total number of shares of Series
D Preferred Stock then outstanding.
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V.
Voting
Rights
Except as otherwise provided by law
or under Article VI hereof, holders of shares of Series D Preferred
Stock will have no voting rights.
VI.
Certain
Restrictions
(a) Whenever dividends payable on the Series D
Preferred Stock are in arrears, thereafter and until all accrued
and unpaid dividends, whether or not declared, on shares of Series
D Preferred Stock outstanding have been paid in full, the
Corporation will not, without the written consent of holders of a
majority of the then issued and outstanding shares of Series D
Preferred Stock:
(i) declare or pay dividends, or make any other
distributions, on any shares of Junior Stock (either as to
dividends or upon a Liquidation Event);
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock of the Corporation ranking
pari passu (either as to
dividends or upon a Liquidation Event) with the shares of Series D
Preferred Stock;
(iii) redeem, purchase or otherwise acquire for
consideration shares of any Junior Stock; or
(iv) redeem, purchase or otherwise acquire for
consideration any shares of stock of the Corporation ranking
pari passu with the shares
of Series D Preferred Stock.
(b) The Corporation will not, without the prior
written consent of holders of a majority of the then issued and
outstanding shares of Series D Preferred Stock:
(i) amend, alter or repeal the rights, preferences
or privileges of the Series D Preferred Stock (including by way of
amendment of the Certificate of Incorporation or this Certificate
of Designation, including in connection with a
merger);
(ii) increase or decrease the authorized number of
shares of the Series D Preferred Stock;
(iii) authorize, create (by reclassification or
otherwise) or issue shares of any class or series of equity
securities of the Corporation that is senior or pari passu to the Series D Preferred
Stock;
(iv) take any action that results in the redemption
of any shares of Common Stock or other equity securities of the
Corporation, other than the outstanding shares of Series D
Preferred Stock;
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(v) issue additional shares of Series D Preferred
Stock (except in respect of in kind dividends or distributions
pursuant to this Certificate of Designation);
(vi) authorize, enter into an agreement with respect
to, or effect any Liquidation Event that does not result in the
redemption in full of the Series D Preferred Stock pursuant to the
terms of this Certificate of Designation;
(vii) amend or waive any provision of the Certificate
of Incorporation, the bylaws of the Corporation or this Certificate
of Designation in a manner that is adverse in any respect to the
holders of the Series D Preferred Stock; or
(viii) enter into any commitment to do any of the
foregoing.
VII.
Reacquired
Shares
Any shares of Series D Preferred
Stock redeemed or otherwise acquired by the Corporation in any
manner whatsoever will be retired and canceled promptly after the
acquisition thereof. All such shares will upon their cancellation
become authorized but unissued shares of preferred stock and may be
reissued as part of a new series of preferred stock subject to the
conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other preferred stock
Certificate of Designation creating a series of preferred stock or
any similar stock or as otherwise required by law.
VIII.
Rank
The Series D Preferred Stock ranks,
with respect to the payment of dividends and the distribution of
assets, junior to all other series of the Corporation’s
preferred stock existing on the date that the first share of Series
D Preferred Stock is issued.
IX.
Definitions
For purposes hereof, the following
terms will have the following meanings:
“Deferred Fees”
means $4.0 million in aggregate of fees that are (i) owed by the
Corporation to Xxxxxxx Sachs Lending Partners LLC in connection
with the New Credit Facilities and/or (ii) owed by BCHI to Moelis
& Company in connection with financial advisory services
provided by it to BCHI in connection with the Merger
Agreement.
“Junior Stock”
shall mean the Common Stock and any other class or series of stock
of the Corporation ranking junior to the Series D Preferred Stock
in respect of the right to receive dividends and distributions or
in respect of the right to receive assets upon the liquidation,
dissolution or winding up of the Corporation.
“Merger
Agreement” shall mean the Agreement and Plan of
Merger, dated August 26, 2017, as amended, by and among the
Corporation, Fusion BCHI Acquisition LLC, a wholly-owned subsidiary
of the Corporation (“BCHI”), and Birch Communications
Holdings, Inc.
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“New Credit
Facilities” shall mean the First Lien Credit and
Guaranty Agreement and the Second Lien Credit and Guaranty
Agreement, each dated as of the date hereof, among the Corporation,
as borrower, certain subsidiaries of the Corporation party thereto,
as guarantor subsidiaries, the lenders party thereto and Wilmington
Trust, National Association, as administrative agent and collateral
agent.
“Senior Stock”
shall mean any class or series of stock of the Corporation issued
after the date on which the first share of Series D Preferred Stock
is issued ranking senior to the Series D Preferred Stock in respect
of the right to receive dividends and distributions and in respect
of the right to receive assets upon the liquidation, dissolution or
winding up of the affairs of the Corporation.
[Signature Page
Follows]
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IN
WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation by its Executive Vice President and
General Counsel this ___ day of May
2018.
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By:
Name:
Xxxxx X. Xxxxxxxx, Xx.
Title:
Executive Vice President and General
Counsel
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