FTE NETWORKS, INC. (OTCMKTS:FTNW) Files An 8-K Entry into a Material Definitive Agreement
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
Companys 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.
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Benchmark Stockholders Representation on the FTE Networks
Board of Directors
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). 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
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.
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| Item 2.01 |
Completion of Acquisition or Disposition of Assets. |
On the Closing Date, FTE Networks acquired from the Sellers all
of the issued and outstanding shares of Benchmark for the
purchase price as set forth in Item 1.01 of this Current Report
on Form 8-K and hereby incorporated by reference into this Item
2.01, to the Amended Purchase Agreement (the Transaction). As a
result, Benchmark is now a wholly owned subsidiary of FTE
Networks.
The foregoing description of the Transaction does not purport to
be complete and is qualified in its entirety by reference to FTE
Networks Current Report on Form 8-K filed with the SEC on March
9, 2017 and the exhibits thereto and Item 1.01 of this Current
Report on Form 8-K and the exhibits hereto.
| Item 2.03 |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement. |
The disclosure provided under the heading Credit Facilities in
Item 1.01 of this Current Report on Form 8-K is hereby
incorporated by reference into this Item 2.03.
| Item 3.02 | Unregistered Sales of Equity Securities. |
On or about the Closing Date, to the Amended Purchase Agreement,
FTE Networks delivered the FTE Shares to the Sellers, together
with the Cash Consideration and the Notes as consideration for
the Benchmark Shares. Also, on or about the Closing Date, to the
Amended Credit Agreement, FTE Networks delivered Credit Agreement
Shares to Lateral. The issuance of the FTE Shares by FTE Networks
to Benchmark and the issuance of the Credit Agreement Shares to
Lateral were both made in reliance on the exemption from
registration provided by Section 4(a)(2) of the Securities Act of
1933, as amended, as the offer and sale of the FTE Shares and the
Credit Agreement Shares does not involve a public offering of FTE
Networks common stock or preferred stock. FTE Networks has
determined that the Sellers and Lateral are accredited investors
within the meaning of Rule 501(a) under the Securities Act. The
certificate or book-entry designations representing the FTE
Shares and the Credit Agreement Shares will bear appropriate
legends to the effect that such securities have not been
registered under the Securities Act or the securities laws of any
state and may not be sold or transferred in the absence of an
effective registration statement under the Securities Act and
applicable state securities laws or an exemption from
registration thereunder. In addition, the FTE Shares are subject
to Registration Rights Agreement and will be registered
thereunder according to its terms.
The foregoing description of the unregistered sales of equity
securities does not purport to be complete and is qualified in
its entirety by reference to Item 1.01 of this Current Report on
Form 8-K and the exhibits hereto.
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| Item 8.01 | Other Events. |
On April 25, 2017, FTE Networks issued a press release announcing
the closing of its acquisition of Benchmark. A copy of the press
release is filed as Exhibit 99.1 to this Current Report on Form
8-K and incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
(a) Financial Statements of Business Acquired. The
financial statements of Benchmark required by Rule 3-05 of
Regulation S-X in connection with the Transaction will be filed
by amendment to this Current Report on Form 8-K.
(b) Pro Forma Financial Information. The pro forma
financial information required by Article 11 of Regulation S-X in
connection with the Transaction will be filed by amendment to
this Current Report on Form 8-K.
(d) Exhibits.
| Exhibit No. | Description | |
| 10.1 |
Amendment No. 1 to Stock Purchase Agreement, dated April 20, 2017, by and among FTE Networks, Benchmark and the Sellers |
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| 10.2 |
Registration Rights Agreement, dated April 20, 2017, by and |
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| 10.3 |
Amendment No 3 to Credit Agreement, dated April 20, 2017, |
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| 99.1 | Press Release dated April 25, 2017. |
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About FTE NETWORKS, INC. (OTCMKTS:FTNW)
FTE Networks, Inc., (FTE Networks) is a provider of international and regional telecommunications and technology systems, and infrastructure services. The Company’s segments are Telecommunications and Staffing. It also offers managed information technology, telecommunications services, subscriber-based services and staffing solutions through its subsidiaries, Jus-Com, Inc. (doing business as FTE Network Services), FTE Wireless, LLC and Focus Venture Partners, Inc. (doing business as FVP Worx). Its services include engineering consulting, design, installation, maintenance and emergency response in various categories, including cabling, equipment installation and configuration, rack and stack, wiring build-outs, infrastructure build-outs, direct current power installation, online service provider/Internet service provider fiber placement, fiber cable splicing and testing. In the wireless space, it provides engineering, design, installation and upgrade of wireless communications networks. FTE NETWORKS, INC. (OTCMKTS:FTNW) Recent Trading Information
FTE NETWORKS, INC. (OTCMKTS:FTNW) closed its last trading session up +0.050 at 0.860 with 29,946 shares trading hands.