FTE NETWORKS, INC. (OTCMKTS:FTNW) Files An 8-K Entry into a Material Definitive Agreement
On March 10, 2020, FTE Networks, Inc. (the “Company”) entered a Securities Purchase Agreement (the “Securities Purchase Agreement”) with GS Capital Partners, LLC (“GS Capital”), whereby GS Capital agreed to purchase an aggregate of $1,800,000 principal amount of 6% Convertible Redeemable Note (the “Note”) The Note contained a $125,000 original issue discount (“OID”) such that the purchase price was $1,675,000.
Below is a description of the material terms of the transaction (all capitalized terms not otherwise defined herein shall have that definition assigned to it in the Securities Purchase Agreement or Note).
The Note is secured by a mortgage covering certain real property described in that certain Mortgage, Assignment of Leases, Security Agreement and Fixture Filing by SCFTE SPV LLC, a South Carolina limited liability company (“Property Owner”), an affiliate of the Company, in favor of GS Capital on or about March 13, 2020 (as amended, restated or otherwise modified from time to time, the “Mortgage”). The Mortgage encumbers certain real properties located in Cook County, Illinois, as further described in the Mortgage (collectively, the “Mortgaged Properties”).
Interest on any unpaid principal balance of the Note shall be paid at the rate of 6% per annum. Interest shall be paid by the Company in shares of the Company\’s common stock (the “Common Stock”) or in cash at the option of the Company. GS Capital is entitled, at its option, to convert all or any amount of the principal face amount of the Note then outstanding into shares of the Common Stock at a price (“Conversion Price”) for each share of Common Stock equal to 66% of the average of the two lowest daily volume weighted average trading prices of the Common Stock as reported on the NYSE American exchange, the OTC Markets, OTCQB exchange or any other exchange upon which the Common Stock may be traded in the future (“Exchange”), during the period of twelve consecutive trading days ending with (and including) the day upon which a Notice of Conversion is received by the Company or its transfer agent.
The Company will issue GS Capital 185,000 shares of its restricted Common Stock as debt commitment shares. In connection with the Note, the Company issued irrevocable transfer agent instructions reserving 4,545,455 shares of its Common Stock for conversions under the Note (the “Share Reserve”) and shall maintain a 2.5 times reserve for the amount then outstanding. Upon full conversion or repayment of this Note, any shares remaining in the Share Reserve shall be cancelled.
The Note may be prepaid or assigned with the following penalties/premiums: