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EX-99.2 - ADDITIONAL EXHIBITS - Fusion Connect, Inc. | fsnn_presentation.htm |
EX-99.1 - ADDITIONAL EXHIBITS - Fusion Connect, Inc. | fsnn_ex991.htm |
EX-10.11 - MATERIAL CONTRACTS - Fusion Connect, Inc. | fsnn_ex1011.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of
Report (Date of earliest event
reported) August 30, 2017 (August 26,
2017)
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
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Delaware
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001-32421
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58-2342021
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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420 Lexington Avenue, Suite 1718, New York, NY
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10170
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(Address of principal executive offices)
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(Zip Code)
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Registrant's
telephone number, including area code:
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(212) 201-2400
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Not Applicable
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(Former name or former address, if changed since last
report)
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
☑ Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
☑ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Item 1.01
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Entry into a Material Definitive Agreement.
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On August 26, 2017, Fusion Telecommunications
International, Inc., a Delaware corporation
(“Fusion”) and its wholly owned subsidiary, Fusion
BCHI Acquisition LLC, a Delaware limited liability company
(“Merger Sub”), entered into an Agreement and Plan of
Merger (the “Merger
Agreement”) with Birch
Communications Holdings, Inc., a Georgia corporation
(“Birch”). The Merger Agreement, provides, among
other things, that upon the terms and conditions set forth therein,
Birch will merge with and into Merger Sub (the
“Merger”), with Merger Sub surviving such merger
(the “Surviving
Company”).
Merger
Consideration. On the
effective date of the Merger, the outstanding shares of common
stock, par value $0.01 per share, of Birch (other than treasury
shares or shares owned of record by any Birch subsidiary) will be
cancelled and converted into the right to receive, in the
aggregate, that number of shares of
Fusion common stock equal to three times the number of shares of
(i) Fusion common stock, par value $0.01 per share
(“Fusion Common
Stock”) issued and
outstanding immediately prior to the Effective Time (as defined in
the Merger Agreement) (assuming the conversion of all outstanding
preferred shares) plus (ii) the number of shares of Fusion Common
Stock issuable upon the exercise of all in-the-money Fusion
warrants (the “Merger
Shares”). Pursuant to
subscription agreements executed by each of the stockholders of
Birch, the Merger Shares will be issued in the name of, and held
by, a limited liability company owned by the shareholders of Birch.
It is the intention of Birch, Merger Sub and Fusion that the Merger
qualify as a “reorganization” within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended. On
the closing date of the Merger, the parties will enter into a
Registration Rights Agreement governing the registration rights of
the Birch shareholders in respect of the Merger Shares and pursuant
to which Fusion will agree, among other things, to use reasonable
best efforts to cause a shelf registration statement to be declared
effective within 120 days of the closing of the
Merger.
Treatment of the
Company’s Preferred Stock. At least 45 days before the closing of the Merger,
the parties will give a written notice to each holder of
Fusion’s existing preferred stock that such holders will have
15 days to convert their preferred stock into Fusion Common Stock.
At the effective time of the Merger, any preferred shares that have
not elected to convert into Fusion Common Stock will automatically
terminate and be deemed cancelled without
consideration.
Representations, Warranties and
Covenants. Fusion, Birch and
Merger Sub each made customary representations, warranties and
covenants in the Merger Agreement, including, among others,
covenants by each of Fusion and Birch to, subject to certain
exceptions, (a) conduct its business in the ordinary course, (b)
preserve intact its business organization and significant business
relationships, preserve satisfactory relationships with its
officers and key employees and maintain its current rights and
franchises, (c) maintain insurance on material assets, and (d)
maintain all permits, each during the interim period between the
execution of the Merger Agreement and the consummation of the
Merger.
Prior to the Closing, Fusion is obligated to use
reasonable best efforts to cause the Merger Shares to be approved
for listing on The NASDAQ Stock Market, LLC
(“NASDAQ”), including, if necessary to comply with
NASDAQ listing requirements, amending the Fusion Restated
Certificate of Incorporation to effect, prior to the effective time
of the Merger, a reverse stock split of the Fusion Common Stock to
satisfy NASDAQ minimum price requirements (the
“Reverse
Split”).
Financing. Closing of the transaction is subject to Fusion
obtaining financing for the transaction, which will be used to
retire existing senior debt facilities at Birch and Fusion (the
“Refinancing”). Each of Fusion and Birch has agreed to
use reasonable best efforts to cooperate and arrange and obtain the
debt financing necessary to effect the Refinancing and to complete
the transactions contemplated by the Merger Agreement, including
paying all expenses associated therewith (the
“Financing”), including negotiating and entering into
binding financing commitments and definitive agreements with
respect to the Financing.
2
Separation of Birch
Consumer/SMB Business and Fusion’s Carrier
Business. Prior to the closing
of the Merger, Birch will spin-off to the existing Birch
stockholders, its existing consumer business, which consists of (i)
the residential customer base, life line and consumer wireless
business, and (ii) its single-line business customer base, in each
case located in the United States and Canada (the
“Birch
Consumer Business”) . The
spin-off will be accomplished in accordance with the terms and
conditions of various agreements to be negotiated and executed by
the parties in the interim period between signing and closing,
which agreements will reflect the terms and conditions outlined
in Exhibit D
to the Merger Agreement. In addition,
prior to the closing of the Merger, Fusion will spin-off or
otherwise exit its Carrier services business.
Restated Charter.
On the effective date of the Merger,
the certificate of incorporation of Fusion will be amended and
restated in the form attached as Exhibit A to the Merger Agreement
(the “Restated
Charter”), which
amendments will, among other things, increase the number of
authorized common shares to 150,000,000.
No Solicitation.
Pursuant to the Merger Agreement,
Fusion has agreed that it will not (i) solicit any alternative
acquisition proposals, (ii) participate in any discussions or
negotiations that would facilitate any alternative proposals or
(iii) furnish any non-public information to any third-party who
seeks to make, or has made, an alternative proposal. However, prior
to the adoption of the Merger Agreement by Fusion’s
stockholders, Fusion may take the foregoing actions in connection
with an alternative proposal that Fusion (after consultation with
its outside legal and financial advisors) determines to constitute
or to be reasonably likely to constitute a Superior Proposal (as
defined in the Merger Agreement); provided that (i) Fusion enters
into a confidentiality agreement with the party making such
alternative proposal and (ii) gives written notice to Birch prior
to taking any of the foregoing actions.
Stockholders’
Meeting. The Merger Agreement
requires Fusion to call and hold a meeting of its stockholders and,
subject to certain exceptions, requires Fusion’s board of
directors to recommend that Fusion’s stockholders adopt the
Merger Agreement. Prior to the adoption of the Merger Agreement by
Fusion’s stockholders, Fusion’s board of directors may,
upon receipt of a Superior Proposal, change its recommendation that
the Fusion stockholders adopt the Merger Agreement, subject to
complying with notice and other specified conditions, including
giving Birch the opportunity to propose changes to the Merger
Agreement in response to such Superior Proposal. If Fusion’s
board of directors changes its recommendation that Fusion’s
stockholders adopt the Merger Agreement Birch may terminate the
Merger Agreement or Fusion may terminate the Merger Agreement if it
is not in breach of its non-solicitation obligations thereunder. In
connection with the execution of the Merger Agreement, the
following directors and named executive officers of Fusion entered
into a support agreement with Birch pursuant to which, among other
things, they agreed to vote their Fusion Common Stock in favor of
the adoption of the Merger Agreement: Marvin S. Rosen, Matthew D.
Rosen, Philip D. Turits, Michael J, Del Giudice, Jack Rosen, Larry
Blum, Paul O’Brien and William Rubin. The aggregate
proportion of Fusion Common Stock to be voted in favor of the
Merger pursuant to the support agreement is 9.8% of the votes
entitled to be cast on this matter. At the stockholders’
meeting, Fusion stockholders will be asked to vote on the Merger
and the Merger Agreement, including the Restated Charter, the
issuance of the Merger Shares and (to the extent necessary to
comply with NASDAQ listing requirements) the Reverse
Split.
Conditions to Effect the
Merger. Each party’s obligation to effect the Merger
is subject to the satisfaction or, in certain instances, waiver of
the following conditions: (i) receipt by Fusion of the necessary
Fusion stockholder approvals, (ii) receipt of approvals by requisite governmental regulators and
authorities, including the expiration or early termination of the
waiting period applicable to the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and federal and
state communications authorities, (iii) the absence of any order, judgment, decree,
injunction or ruling that enjoins or prohibits the consummation of
the Merger, (iv) the Financing, (v) the Merger Shares being
approved for listing on NASDAQ or a new listing application being
approved, (vi) all shares of Fusion’s existing preferred
stock being converted into Fusion Common Stock or cancelled, (vii)
the Stockholders’ Agreement and the Registration Rights
Agreement being executed and delivered by the parties thereto,
(viii) Fusion divesting its ownership interest in Fusion Global
Services LLC (“Fusion
Global”) or or otherwise
existing that business segment, (ix) the spin-off of the Birch
Consumer Business shall have been completed, (x) the members of the
post-closing Fusion board being agreed by the parties in accordance
with the provisions of the Stockholders’ Agreement.
Birch’s obligations to effect the Merger are subject to the
satisfaction or waiver of the following additional conditions: (i)
accuracy of Fusion’s representations and warranties as of the
date of the Merger Agreement and as of the Effective Time, (ii)
performance in all material respects by Fusion of its covenants at
or prior to the closing date of the Merger and (iii) absence of a
material adverse effect on Fusion. Fusion’s obligations to
effect the Merger are subject to the satisfaction or waiver of the
following additional conditions: (i) accuracy of Birch’s
representations and warranties as of the date of the Merger
Agreement and as of the Effective Time, (ii) performance in all
material respects by Birch of its covenants at or prior to the
closing date of the Merger, (iii) absence of a material adverse
effect on Birch, and (iv) delivery by Birch of a FIRPTA
certificate. Fusion cannot predict whether such conditions
will be satisfied, or when or if the Merger will be
consummated.
3
Termination Rights.
The Merger Agreement contains certain
termination rights for each of Fusion and Birch. Subject to certain
exceptions and limitations, either party may terminate the Merger
Agreement if: (i) the Merger is not consummated by April 2, 2018,
subject to extension until April 30, 2018 if necessary to obtain
certain regulatory and governmental approvals, (ii) there is a
final and non-appealable law or order in effect prohibiting the
Merger, (iii) Fusion’s stockholder approval is not obtained
at the meeting of Fusion’s stockholders or (iv) binding
commitments with respect to the Financing are not received within
60 days after the signing date of the Merger Agreement. The Merger
Agreement may be terminated by Fusion if: (i) Birch has breached
any of its representations and warranties or failed to perform any
of its covenants or conditions such that the closing conditions to
Fusion’s obligation to consummate the Merger would not be
satisfied and such breach has not been cured within the specified
cure period or is incapable of being cured or (ii) if the Fusion
board of directors has changed its recommendation of the Merger
Agreement and Fusion is not in breach of its non-solicitation
obligations. The Merger Agreement may be terminated by Birch if:
(i) Fusion has breached any of its representations and warranties
or failed to perform any of its covenants or conditions, such that
the closing conditions to Birch’s obligation to consummate
the Merger would not be satisfied and such breach has not been
cured within the specified cure period or is incapable of being
cured or (ii) if the Fusion board of directors has changed its
recommendation of the Merger Agreement or Fusion has breached its
obligations under the non-solicitation provisions of the Merger
Agreement. The Merger Agreement also may be terminated by the
mutual agreement of Fusion and Birch.
Post-Closing Composition of Fusion Board of Directors.
After
the closing of the Merger, the boards of directors of Fusion and
its subsidiaries, and their respective executive officers, will be
reconstituted. Post-closing, the board of directors of Fusion will
consist of nine directors. Four directors, including at least one
independent director, will be nominated by a Fusion nominating
committee and four directors, including at least one independent
director, will be nominated by the current Birch stockholders. The
ninth director, who will be independent, will be nominated by the
current Birch stockholders subject to the consent of the Fusion
nominating committee. Matthew D. Rosen, Fusion’s Chief
Executive Officer, will remain Chief Executive Officer of Fusion on
a post-Merger basis. Mr. Rosen will also serve as the initial
post-Merger Chairman of the Board and Holcombe T. Green, Jr., a
principal stockholder of Birch, will serve as the initial
post-Merger Vice Chairman of the Board. The other post-Merger
directors and executive officers of Fusion and its subsidiaries
have not yet been determined but will be selected prior to the
Effective Time by mutual agreement of Birch and
Fusion.
At the closing of the Merger, Fusion, BCHI
Holdings, LLC (a new limited liability company formed and owned by
the current stockholders of Birch)(“Holdings”) and certain affiliates
of Fusion will enter into a stockholders’ agreement (the
“Stockholders’
Agreement”) setting forth certain agreements among the
parties regarding the governance of Fusion post-Merger. Among other
things, the Stockholders’ Agreement will require each party
to vote its Fusion voting securities in favor of electing, to
Fusion’s board of directors, the director nominees selected
in accordance with the provisions described in the foregoing
paragraph. The rights of the Fusion nominating committee and the
Birch stockholders to nominate Fusion directors will continue, as
to the Fusion nominating committee, until such time as
Fusion’s current Chairman of the Board of Directors, Mr.
Marvin Rosen and Matthew Rosen, collectively beneficially own less
than one and one-half percent (1.5%) of the issued and outstanding
Fusion Common Stock, and, as to Holdings, until such time as it and
its affiliates collectively beneficially own less than twenty
percent (20%) of the number of Merger Shares issued in the
Merger.
The
foregoing description of the Merger Agreement does not purport to
be complete and is qualified in its entirety by reference to the
Merger Agreement which is filed herewith as Exhibit 10.1.1 to this report
and is incorporated by reference herein. The representations,
warranties and covenants contained in the Merger Agreement
(i) have been made
only for purposes of the Merger Agreement, (ii) have been
qualified by confidential disclosures made by the parties in
connection with the Merger Agreement, (iii) are subject to
materiality qualifications contained in the Merger Agreement which
may differ from what may be viewed as material by investors,
(iv) were made only as of the date of the Merger Agreement or
such other date as is specified in the Merger Agreement and
(v) have been included in the Merger Agreement for the purpose
of allocating risk between the contracting parties rather than
establishing matters as facts. Accordingly, the Merger Agreement is
included with this filing only to provide investors with
information regarding the terms of the Merger Agreement, and not to
provide investors with any other factual information regarding the
parties or their respective businesses. Investors and
security holders should not rely on the representations, warranties
and covenants or any description thereof as characterizations of
the actual state of facts or condition of Fusion or any subsidiary
of Fusion. Moreover, information concerning the subject matter of
the representations, warranties and covenants may change after the
date of the agreement, which subsequent information may or may not
be fully reflected in public disclosures.
4
Item 7.01
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Regulation FD Disclosure.
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On August 28, 2017, Fusion issued a press release
announcing that it had entered into the Merger Agreement, which
press release is furnished herewith as Exhibit 99.1
and is incorporated by reference
herein.
In accordance with General Instruction B.2 of Form
8-K, the press release furnished as Exhibit 99.1
shall not be deemed filed for purposes
of Section 18 of the Securities Exchange Act of 1934, as
amended, nor shall such information be deemed incorporated by
reference in any filing under the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific
reference in such a filing. This report will not be deemed an
admission as to the materiality of any information required to be
disclosed solely to satisfy the requirements of Regulation
FD.
Fusion
hereby furnishes an investor presentation dated August 28, 2017
prepared in connection with the Merger Agreement, as Exhibit 99.2
to this Report on Form 8-K.
Additional Information About the Merger and Where to Find
It
Fusion intends to announce the time, date and
place of the Stockholders’ Meeting to obtain stockholder
approval in connection with the proposed Merger; and expects to
file with the Securities and Exchange Commission
(“SEC”) a proxy statement and other relevant
documents in connection with the proposed Merger. Investors are
urged to read the definitive proxy statement and other relevant
materials carefully and in their entirety when they become
available because they will contain important information about
Fusion, Birch and the proposed Merger. Investors may obtain a free
copy of these materials (when they are available) and other
documents filed by Fusion with the SEC at the SEC’s website
at www.sec.gov,
at Fusion’s website at www.fusionconnect.com
or by sending a written request
to Fusion Telecommunications International, Inc., Attention:
Corporate Secretary, 420 Lexington Avenue, Suite 1718, New York,
New York 10170.
Participants in the Solicitation
Fusion
and its directors, executive officers and certain other members of
management and employees may be deemed to be participants in
soliciting proxies from its stockholders in connection with the
proposed merger. Information regarding the persons who may, under
the rules of the SEC, be considered to be participants in the
solicitation of Fusion stockholders in connection with the proposed
merger will be set forth in Fusion’s definitive proxy
statement for the Stockholders’ Meeting. Additional
information regarding these individuals and any direct or indirect
interests they may have in the proposed merger will be set forth in
the definitive proxy statement when and if it is filed with the SEC
in connection with the proposed Merger.
Forward-Looking Statements
Certain statements contained in this filing may be
considered forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended, including statements regarding the Merger, the range of
consideration of the Merger and the ability of the parties to
consummate the Merger. These forward-looking statements generally
include statements that are predictive in nature and depend upon or
refer to future events or conditions, and include words such as
“believes,” “plans,”
“anticipates,”“projects,”
“estimates,” “expects,”
“intends,” “strategy,”
“future,” “opportunity,” “may,”
“will,” “should,” “could,”
“potential,” or similar expressions. Statements that
are not historical facts are forward-looking statements.
Forward-looking statements are based on current beliefs and
assumptions that are subject to risks and uncertainties.
Forward-looking statements speak only as of the date they are made,
and the Fusion undertakes no obligation to update any of them
publicly in light of new information or future events. Actual
results could differ materially from those contained in any
forward-looking statement as a result of various factors,
including, without limitation: (1) Fusion may be unable to
obtain the stockholder approval required for the Merger;
(2) conditions to the closing of the Merger may not be
satisfied and required regulatory approvals may not be obtained;
(3) the Merger may involve unexpected costs, liabilities or
delays; (4) the business of Fusion may suffer as a result of
uncertainty surrounding the Merger; (5) the outcome of any
legal proceedings related to the Merger; (6) Fusion may be
adversely affected by other economic, business, and/or competitive
factors; (7) the occurrence of any event, change or other
circumstances that could give rise to the termination of the Merger
Agreement; (8) risks that the Merger disrupts current plans
and operations and the potential difficulties in employee retention
as a result of the Merger; and (9) other risks to consummation
of the Merger, including the risk that the Merger may not be
consummated within the expected time period or at all. Additional
factors that may affect the future results of Fusion are set forth
in its filings with the SEC, including its Annual Report on Form
10-K, as amended, for the year ended December 31, 2016, which
are available on the SEC’s website at www.sec.gov.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date
thereof.
5
Item 9.01
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Financial Statements and Exhibits.
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(d)
Exhibits.
Exhibit No.
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Description of Exhibit
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Agreement and Plan of Merger, dated as of August 26, 2017, by and
among Fusion Telecommunications International, Inc., Fusion BCHI
Acquisition LLC and Birch Communications Holdings,
Inc.
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Press Release dated August 28, 2017.
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Investors Presentation dated August 28, 2017
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SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused
this report on Form 8-K to be signed on its behalf by the
undersigned thereunto duly authorized.
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FUSION TELECOMMUNICATIONS
INTERNATIONAL, INC.
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By: /s/ James P. Prenetta,
Jr.
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James P. Prenetta, Jr.
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August 30, 2017
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EVP and General Counsel
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6
EXHIBIT INDEX
Exhibit No.
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Description of Exhibit
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Agreement and Plan of Merger, dated as of August 26, 2017, by and
among Fusion Telecommunications International, Inc., Fusion BCHI
Acquisition LLC, and Birch Communications Holdings,
Inc.
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Press Release dated August 28, 2017.
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Investors Presentation dated August 28, 2017
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7