Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_________________________________
SCHEDULE 14F-1
_________________________________
INFORMATION STATEMENT
PURSUANT TO SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.
|
(Exact name of registrant as specified in its charter)
|
Delaware
|
001-32421
|
58-2342021
|
(State or other jurisdiction of incorporation)
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
420 Lexington Avenue, Suite 1718 New York, NY
|
10170
|
(Address of principal executive offices)
|
(Zip Code)
|
Registrant’s
telephone number, including area code:
|
(212) 201-2400
|
NOTICE OF CHANGE IN THE MAJORITY OF THE BOARD OF
DIRECTORS
This
Information Statement is being furnished on or about April 2, 2018
to all stockholders of record at the close of business on March 28,
2018 of (i) the common stock, par value $0.01 per share
(“Common Stock”), and (ii) series B-2 cumulative
convertible preferred stock, $0.01 par value per share, of Fusion
Telecommunications International, Inc. (the “Company,”
“Fusion,” “we,” “us,” or
“our”) .
This
Information Statement is required by Section 14(f) of the
Securities Exchange Act of 1934 (the “Exchange Act”)
and Rule 14f-1 promulgated thereunder. You are urged to read this
Information Statement carefully and in its entirety. However, you
are not required to take any action in connection with this
Information Statement.
THIS INFORMATION STATEMENT IS BEING PROVIDED SOLELY FOR
INFORMATIONAL PURPOSES AND NOT IN CONNECTION WITH ANY VOTE OR OTHER
ACTION OF THE STOCKHOLDERS OF FUSION TELECOMMUNICATIONS
INTERNATIONAL, INC.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE NOT BEING REQUESTED
TO SEND US A PROXY.
INTRODUCTION
On
August 26, 2017, Fusion, Fusion BCHI Acquisition LLC, a Delaware
limited liability company (“Merger Sub”) and Birch
Communications Holdings, Inc., a Georgia corporation
(“Birch”), entered into an Agreement and Plan of
Merger, as amended on September 15, 2017, September 29, 2017,
October 27, 2017, January 24, 2018, January 25, 2018, March 12,
2018 and April 3, 2018 (as so amended, the “Merger
Agreement”), pursuant to the terms of which Birch will merge
with and into Merger Sub (the “Merger”), with Merger
Sub surviving the Merger as a wholly-owned subsidiary of the
Company.
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, a number of shares of our Common Stock equal to three
times the number of shares of (i) our Common Stock issued and
outstanding immediately prior to the closing of the Merger (but
excluding the shares of our Common Stock issued by us in a public
offering of our Common Stock completed in February 2018 as well as
certain other issued and outstanding shares of our Common Stock
), plus (ii) the number of shares of our Common Stock
issued or issuable upon the conversion of all classes or series of
our preferred stock outstanding immediately prior to the closing of
the Merger, plus (iii) the number of shares of our Common
Stock issuable upon the exercise of all in-the-money Fusion
warrants (as adjusted for stock splits and calculated using the
treasury stock method) (collectively, the “Merger
Shares”).
Pursuant
to subscription agreements executed by each of the shareholders of
Birch, the Merger Shares will be issued in the name of, and held
by, BCHI Holdings, LLC (“BCHI”), a Georgia limited
liability company owned by the shareholders of Birch. On the
closing date of the Merger, BCHI and Fusion will enter into a
registration rights agreement governing the registration rights of
BCHI in respect of the Merger Shares and pursuant to which we will
agree, among other things, to use our reasonable best efforts to
cause a shelf registration statement covering the resale of up to
25% of the Merger Shares to be declared effective by the Securities
and Exchange Commission (the “SEC”) within 120 days of
the closing of the Merger.
Closing of the Merger is subject to numerous
conditions, including (i) Fusion obtaining financing for the
transaction, which will be used to retire existing senior debt
facilities at Birch and Fusion, (ii) all existing shares of our
preferred stock being converted into shares of our Common Stock,
and (iii) Fusion using its reasonable best efforts to cause the
Merger Shares to be approved for listing on The Nasdaq Stock
Market, Inc., including, if
necessary, in order to comply with Nasdaq listing requirements,
amending Fusion’s existing certificate of incorporation prior
to the effective time of the Merger to effect a reverse stock split
of our Common Stock to satisfy the applicable Nasdaq minimum
pricing requirements (the “Reverse Stock Split”).
If the Reverse Stock Split must be completed prior to the closing
of the Merger, it will be in a range of up to 5:1, with the final
ratio to be determined by our existing board of directors (the
“Board”).
In
addition, prior to the closing of the Merger, Birch is required to
spin-off to the existing Birch stockholders, its US-based consumer
business, which consists of (i) the residential customer base, life
line and consumer wireless business in the United States, and (ii)
its single-line business customer base in the United States. In
addition, we have agreed that on or prior to the consummation of
the Merger, we will use our reasonable best efforts to either (i)
divest our 60% ownership interest in Fusion Global Services, LLC
(“FGS”) or (ii) dissolve FGS.
From
and after the effective time of the Merger, under the terms of a
stockholder’s agreement to be executed at the closing of the
Merger, the size of the Board will initially be fixed at seven
directors and nominees will be selected as follows: (i) three
directors, including at least one director who satisfies the Nasdaq
listing standard’s independence requirements, will be
nominated by a nominating committee comprised of our directors
serving on the Board on the date of the nomination (the
"committee"), (ii) three directors, including at least one that
satisfies the Nasdaq listing standard’s independence
requirements, will be nominated by BCHI, and (iii) one director,
who must satisfy the Nasdaq listing standard’s independence
requirements, will be nominated by BCHI, subject to the reasonable
consent of the committee.
At
our Annual Meeting held on February 21, 2018, our stockholders
overwhelmingly approved, among other things, the
following:
●
(i) the Merger Agreement, (ii) the Merger,
(iii) the issuance of the Merger Shares, and (iv) the other
transactions contemplated by the Merger Agreement;
●
an amendment to our
certificate of incorporation (the “Certificate of
Amendment”) to effectuate a reverse stock split of our
outstanding shares of Common Stock at a ratio of up to 5:1, to the
extent determined necessary by the Board to comply with the listing
requirements in connection with the post-Merger listing of our
Common Stock on Nasdaq; and
●
to adopt an amended
and restated certificate of incorporation of the Company (the
“Restated Charter”) to, among other things, (i)
increase the number of authorized shares of our Common Stock from
90,000,000 to 150,000,000, and (ii) change our name to
“Fusion Connect, Inc.”
Under
the terms of the Merger Agreement and upon the later of (i) 11 days
after the mailing of this Information Statement and (ii) the
closing of the Merger, Paul C. O’Brien, Larry Blum, Philip D.
Turits, Jack Rosen and William Rubin will resign as members of the
Board and the following four individuals will be appointed by the
Board -- Holcombe T. Green, Jr., Holcombe Green, III, Lewis Dickey
and Rafe de la Gueronniere. The description of the Merger and the
Merger Agreement contained in this Information Statement do not
purport to be complete and are qualified in their entirety by the
terms of the actual Merger Agreement, and each amendment thereto,
which were filed with our definitive proxy statement relating to
the Merger filed with the SEC on December 28, 2017 and our Current
Reports on Form 8-K filed with the SEC on January 29, 2018, March
12, 2018 and April 3, 2018.
Section
14(f) of the Exchange Act and Rule 14f-l promulgated thereunder
require the mailing to stockholders of the information set forth in
this Information Statement at least 10 days prior to the date a
change in a majority of directors occurs (otherwise than at a
meeting of stockholders). Accordingly, the change in a majority of
directors will not occur until 10 days following the filing and
mailing of this Information Statement.
CHANGE OF CONTROL AND CHANGE OF BOARD
The
Board has determined that the consummation of the Merger will
constitute a change of control, as upon the closing of the Merger,
the majority of the members of the Board will change and more than
a majority of the shares of our Common Stock outstanding
immediately following the Merger will be owned by
BCHI.
DIRECTORS AND EXECUTIVE OFFICERS
Current Officers and Directors of the Company
The
current members of the Board and the current executive officers of
the Company, together with their respective ages and certain
biographical information, are set forth below:
Name
|
|
Age
|
|
Position
|
Marvin
S. Rosen
|
|
77
|
|
Chairman
of the Board
|
Philip
D. Turits
|
|
84
|
|
Secretary,
Treasurer and Director
|
Matthew
D. Rosen
|
|
46
|
|
Chief
Executive Officer and Director
|
Jack
Rosen
|
|
71
|
|
Director
|
William
Rubin
|
|
65
|
|
Director
|
Paul C.
O'Brien
|
|
78
|
|
Director
|
Michael
J. Del Giudice
|
|
75
|
|
Director
|
Larry
Blum
|
|
75
|
|
Director
|
Gordon
Hutchins, Jr.
|
|
68
|
|
President
and Chief Operating Officer
|
Michael
R. Bauer
|
|
45
|
|
Chief
Financial Officer
|
Jonathan
Kaufman
|
|
58
|
|
Chief
Strategy Officer
|
James
P. Prenetta, Jr.
|
|
55
|
|
Executive
Vice President and General Counsel
|
Jan
Sarro
|
|
63
|
|
Executive
Vice President – Marketing and Business
Development
|
Russell
P. Markman
|
|
67
|
|
President,
Business Services
|
Lisa
Taranto
|
|
50
|
|
Vice
President, Finance and Principal Accounting Officer
|
Board of Directors and Executive Officers
Marvin S. Rosen, Chairman of the Board
Marvin
Rosen co-founded the Company in 1997. He has served as the Chairman
of the Board since November 2004, Vice Chairman of the Board from
December 1998 to November 2004 and has been a member of the Board
since March 1998. Upon consummation of the Merger, Mr. Rosen will
step-down as Chairman of the Board but will continue to serve as a
director. Mr. Rosen served as our Chief Executive Officer from
April 2000 to March 2006. In January 2014, he rejoined the
international law firm of Greenberg Traurig LLP as a shareholder
specializing in corporate securities matters. He previously was a
shareholder of that firm and also acted as Of Counsel for a number
of years. Mr. Rosen was Finance Chairman for the
Democratic National Committee from September 1995 to January 1997.
Currently, he serves on the Board of Directors of the Robert F.
Kennedy Center for Justice and Human Rights and the Howard Gilman
Foundation. Mr. Rosen served on the Board of
Directors of Terremark Worldwide, Inc. from 2000 until its sale to
Verizon in 2011. The Board believes that Mr. Rosen’s
background as the co-founder and former Chief Executive Officer of
the Company, a securities attorney and as a former director of a
another public company provides him with the industry, financial,
legal, and leadership experience to advise the Board on strategic
and tactical matters. Mr. Rosen’s son, Matthew
Rosen, is our Chief Executive Officer, and serves on our Board of
Directors.
Philip D. Turits, Secretary, Treasurer, and Director
Mr.
Turits co-founded the Company in 1997 and has served as a Director
since September 1997, as Secretary since October 1997, as Treasurer
since March 1998 and as Vice Chairman of the Board from March 1998
to December 1998. Upon consummation of the Merger, Mr. Turits will
resign from the Board but will continue to serve as Corporate
Secretary. From September 1991 to February 1996, Mr. Turits served
as Treasurer and Chief Operating Officer for Larry Stuart, Ltd., a
consumer products company, and prior to 1991 he served as President
and Chief Executive Officer of Continental Chemical
Company.
Matthew D. Rosen, Chief Executive Officer and Director
Mr.
Rosen has served as a Director since May 2005 and has been our
Chief Executive Officer since March 2006. Upon consummation of the
Merger, Mr. Rosen will continue to serve as the Chief Executive
Officer of the Company and he will become Chairman of the Board.
Mr. Rosen served as our President from March 2006 until March 2008,
as our Chief Operating Officer from August 2003 to March 2006, as
our Executive Vice President and Chief Operating Officer from
February 2002 to August 2003, as our Executive Vice President and
President of Global Operations from November 2000 to January 2002
and as our President of US Operations from March 2000 to November
2000. The Board believes that Mr. Rosen’s background as our
current Chief Executive Officer and as our former Chief Operating
Officer, a senior executive in the telecommunications
industry, an experienced operations executive and a former
investment banker provides him with the industry, operational,
financial and leadership experience to advise the Board on all
aspects of the Company’s business. Mr. Rosen is
the son of our current Chairman of the Board, Marvin
Rosen.
Jack Rosen, Director
Mr.
Rosen has served as a Director since July 2012. Upon consummation
of the Merger, Mr. Rosen will resign from the Board. Mr. Rosen is
the founder and Chief Executive of Rosen Partners LLC, a
residential and commercial real estate development firm. He is also
the Chairman of the American Council for World Jewry, Inc. and the
President of the American Jewish Congress. In addition, Mr. Rosen
oversees a wide array of healthcare, cosmetic and
telecommunications business ventures throughout the U.S., Europe
and Asia. Mr. Rosen also serves on the Advisory Board of Altimo, an
investment company in Russia, Turkey and the Commonwealth of
Independent States, operating in the field of mobile and fixed-line
communications. Mr. Rosen is also a member of the Council on
Foreign Relations, an independent, nonpartisan membership
organization, think tank, and publisher.
William Rubin, Director
Mr.
Rubin has served as a Director since February 2012. Upon
consummation of the Merger, Mr. Rubin will resign from the Board.
Since 1992, he has been President of the Rubin Group, a consulting
firm representing clients before governmental entities. Previously,
he was Assistant Insurance Commissioner and Treasurer of the State
of Florida, where he was directly responsible for all activities
related to the Florida State Board of Administration, the agency
that manages the investments for Florida’s pension funds. Mr.
Rubin also serves as an advisor to many large companies, primarily
health care companies doing business in Florida.
Paul C. O’Brien, Director
Mr.
O’Brien has served as a Director since August 1998. Upon
consummation of the Merger, Mr. O’Brien will resign from the
Board. Since January 1995, he has served as the President of the
O’Brien Group, Inc., a consulting and investment firm. From
February 1988 to December 1994, he was the President and Chairman
of New England Telephone (a subsidiary of NYNEX), now Verizon, a
telecommunications company. Mr. O'Brien also serves on the Board of
Directors of Astrobotics and The Computer Merchant and is the
Chairman of the Board of Jumpstart Micro Inc.
Michael J. Del Giudice, Director
Mr. Del
Giudice has served as a Director since November 2004 and will
continue as a director following consummation of the Merger. He is
a Senior Managing Director of Millennium Capital Markets LLC and
Senior Managing Director of MCM Securities LLC, both of which he
founded in 1996. Mr. Del Giudice also serves as Chairman of
Carnegie Hudson Resources, LLC, founded in 2012. Mr. Del Giudice
has been a Member of the Board of Directors of Consolidated Edison
Company of New York, Inc. since 1999, and is currently a member of
its Audit Committee and Chairman of its Corporate Governance and
Nominating Committee. Mr. Del Giudice served as a director of Reis,
Inc. from 2007 to 2013 and was a director of Barnes and Noble, Inc.
from 1999 to September 2010. He is also Vice Chairman of the New
York Racing Association. Mr. Del Giudice was a General Partner and
Managing Director at Lazard Frères & Co. LLC from 1985 to
1995. From 1983 to 1985, Mr. Del Giudice was Chief of Staff to New
York Governor Mario M. Cuomo. He served from 1979 to 1981 as Deputy
Chief of Staff to Governor Hugh L. Carey and from 1975 to 1979 as
Chief of Staff to the then Speaker of the New York Assembly. The
Board believes that Mr. Del Giudice’s background as a Senior
Managing Director of securities and investment firms, an investment
banker, Chief of Staff to a Governor and an active corporate
director provides him with the financial and leadership experience
to be a valuable advisor to executive management and the
Board.
Larry Blum, Director
Mr.
Blum has served as a Director since February 2012. Upon
consummation of the Merger, Mr. Blum will resign from the Board.
Mr. Blum has been a Senior Advisor for Marcum LLP (formerly known
as Marcum Rachlin), independent registered public accountants,
since 2011. For more than 18 years, Mr. Blum served as
the Managing Partner of Rachlin LLP, directing the firm’s
growth to its position as Florida’s largest independent
accounting and business advisory firm up until its merger with
Marcum LLP in 2009. Mr. Blum has also served as a
litigation advisor and is a member of the Florida
Bar.
Gordon Hutchins, Jr., President and Chief Operating
Officer
Mr.
Hutchins has served as our President and Chief Operating Officer
since March 2008. Following consummation of the Merger, Mr.
Hutchins will continue to serve as President but will no longer
serve as our Chief Operating Officer. Mr. Hutchins served as our
Executive Vice President from December 2005 to March 2008 and as
Acting Chief Financial Officer from January 2010 to April 2016.
Prior to joining us, Mr. Hutchins served as President and Chief
Executive Officer of SwissFone, Inc., a telecommunications
carrier. Prior to joining SwissFone, Mr. Hutchins served as
President and Chief Executive Officer of STAR Telecommunications,
Inc., an international telecommunications carrier. Mr.
Hutchins has also served as President and Chief Executive Officer
of GH Associates, Inc., a management-consulting firm that he
founded. During his early career, Mr. Hutchins served as
President and Chief Executive Officer of LDX NET, Inc., a fiber
optic network company, and held positions with MCI, McDonnell
Douglas Corporation and AT&T.
Michael R. Bauer, Chief Financial Officer
Mr.
Bauer has served as our Chief Financial Officer since April 13,
2016. Prior to joining the Company, Mr. Bauer served as Chief
Financial Officer at GTT Communications Inc. from June 2012 to June
2015. Prior to serving as GTT’s Chief Financial Officer, Mr.
Bauer served as its acting Chief Financial Officer, Principal
Accounting Officer and Treasurer from December 2011 to June 2012
and as its Vice President, Finance and Controller from June 2009 to
December 2011. Mr. Bauer has over 20 years of broad finance and
accounting experience. Prior to joining GTT, Mr. Bauer led the
financial planning and analysis and investor relations efforts at
MeriStar Hospitality Corporation. Mr. Bauer began his career with
Arthur Andersen in audit and business advisory
services.
Jonathan Kaufman, Chief Strategy Officer
Mr.
Kaufman has served as our Chief Strategy Officer since January
2015. Prior to assuming that position, Mr. Kaufman served as
President, Business Services, from October 2012 (the date we
acquired his company, Network Billing Systems, LLC, a company he
founded in 1998) until January 2015. From its founding
until its sale in 2012, Mr. Kaufman served as Chief Executive
Officer of Network Billing Systems. Prior to founding Network
Billing Systems, Mr. Kaufman served as Chief Executive Officer of
Target Telecom Inc., a telecommunications service company that he
founded in 1984 and sold to WorldCom in 1996.
Russell P. Markman, President Business Services
Mr.
Markman has served as our President Business Services since January
2015. Following consummation of the Merger, Mr. Markman will serve
as our Chief Operating Officer. Prior to assuming his position as
President Business Services, Mr. Markman served as Executive Vice
President, Business Services from October 2012 to January
2015. Prior to our acquisition of Network Billing Systems in
October 2012, Mr. Markman served as President of that company from
January 2009 to October 2012. Prior to becoming President of
Network Billing Systems, Mr. Markman served as Vice President,
Operations of that company from October 2003 to October
2012. Prior to joining Network Billing Systems, Mr.
Markman established the alternate channel distribution program for
commercial sales at RCN Corporation, where he served as Director of
Commercial Sales.
James P. Prenetta, Jr., Executive Vice President and General
Counsel
Mr.
Prenetta has served as our Executive Vice President and General
Counsel since June 2017 and previously served in that role from May
2014 through January 2015. Following consummation of the Merger,
Mr. Prenetta will continue to serve as the Company’s
Executive Vice President and General Counsel. From January 2015 to
June 2017, Mr. Prenetta acted as Corporate Counsel to Fusion. From
September 2009 to January 2017, Mr. Prenetta served as General
Counsel and Corporate Secretary for Hibernia NGS Limited and its
various subsidiaries. Prior to joining Hibernia Networks, Mr.
Prenetta served as Senior Vice President, General Counsel and
Corporate Secretary for One Communications Corp. and its
predecessor CTC Communications Corporation from January 2004 to
September 2009. From 2003 to 2009, Mr. Prenetta also served as
special counsel to Columbia Ventures Corporation, an investment
firm.
Jan Sarro, Executive Vice President – Marketing and Business
Development
Ms.
Sarro has served as our Executive Vice President of Marketing and
Business Development since November 2012. Prior to
assuming that role, Ms. Sarro served as our Executive Vice
President – Corporate Services from March 2008 to October
2012, as our Executive Vice President, Carrier Services from April
2005 to March 2008, and as our Vice President of Sales and
Marketing from March 2002 to April 2005. Prior to joining the
Company, Ms. Sarro served as President of the Americas for Viatel,
Inc., a global, facilities-based communications carrier. Ms. Sarro
has over 30 years of experience in the telecommunications
industry. Ms. Sarro has also held senior executive
marketing and sales management positions at Argo Communications,
FTC Communications, TRT Communications and
WorldCom.
Lisa Taranto, Vice President, Finance and Principal Accounting
Officer
Ms.
Taranto has served as our Principal Accounting Officer since August
2015 and as our Vice President, Finance since January
2014. From January 2014 until August 2015, she also held the
position of Vice President, Accounting. Prior to joining
us, Ms. Taranto served as Vice President, Finance and Accounting
for Broadvox, LLC and from January 2006 to January 2011 served as
Vice President, Accounting and Financial Operations for Cypress
Communications. From May 2003 to April 2005, Ms. Taranto held
senior financial management roles at AirGate PCS (a Sprint
Company), where she built the company's settlements operations
organization and held a position on that company's external
controls and disclosures committee. Ms. Taranto has over 25 years
of financial management experience in the communications industry.
Earlier in her career, Ms. Taranto held executive management roles
at MCI/Verizon Business, where she led the Global Financial
Operations and IT Revenue Systems
organizations.
Officers and Directors Following the Merger
Set
forth below is certain information regarding the persons who will
be executive officers of Fusion following the closing of the Merger
and persons who will be directors of the Company following the
resignation of Paul C. O’Brien,
Larry Blum, Philip D. Turits, Jack Rosen and William
Rubin.
Upon
consummation of the Merger, the Board will initially consist of
seven directors. Pursuant to the Merger Agreement and upon the
later of (i) 11 days after the mailing of this Information
Statement and (ii) the closing date of the Merger, Paul C.
O’Brien, Larry Blum, Philip D. Turits, Jack Rosen and William
Rubin will resign as members of the Board and the following four
persons will be appointed to the Board: Holcombe T. Green, Jr.,
Holcombe Green, III, Lewis Dickey and Rafe de la Gueronniere. Four
of the directors meet the definition of “independent
director” as defined in Rule 5605(a)(2) of the Nasdaq listing
requirements (“Rule 5605(a)(2)”).
The
following table lists the names, ages and position of the
individuals who, as of the date hereof, and pursuant to the Merger
Agreement, are expected to serve as executive officers and
directors of the Company upon consummation of the
Merger:
Name
|
|
Age
|
|
Position
|
Matthew
D. Rosen
|
|
46
|
|
Chairman
of the Board and Chief Executive Officer*
|
Holcombe
T. Green, Jr.
|
|
79
|
|
Vice
Chairman of the Board
|
Marvin
S. Rosen
|
|
77
|
|
Director*
|
Holcombe
Green, III
|
|
49
|
|
Director
|
Lewis
Dickey
|
|
56
|
|
Director
|
Rafe de
la Gueronniere
|
|
65
|
|
Director
|
Michael
J. Del Giudice
|
|
75
|
|
Director*
|
Gordon
Hutchins, Jr.
|
|
68
|
|
President*
|
Kevin
Dotts
|
|
54
|
|
Executive
Vice President, Chief Financial Officer and Pricipal Accounting
Officer
|
Russell
P. Markman
|
|
67
|
|
Chief
Operating Officer*
|
James
P. Prenetta, Jr.
|
|
55
|
|
Executive
Vice President and General Counsel*
|
Philip
D. Turits
|
|
84
|
|
Corporate
Secretary*
|
* Background information on these
directors and executive officers is included in the “Current
Officers and Directors of the Company" section
above.
Holcombe T. Green, Jr.
Upon
consummation of the Merger, Mr. Green, Jr. will be appointed as a
Director of Fusion and will serve as Vice Chairman of the
post-merger Board. Mr. Green, Jr. is a co-founder, and has served
as a director, of Birch Equity Partners, LLC since January 2015.
Prior to forming Birch Equity Partners, Mr. Green founded and was a
principal at Green Capital Investors, where he also served as its
Chairman, a Director and Chief Executive Officer at the firm's
portfolio companies. Prior to that, Mr. Green, Jr. served as the
Chairman and Chief Executive Officer at Westpoint Stevens Inc. from
October 1992 to June 2003. Prior to that, Mr. Green was a Senior
Partner at Hansell & Post, where he practiced corporate law for
more than 20 years. Mr. Green served as a Trustee of Yale
University Board; as a Director of High Museum of Art, Atlanta
Botanical Garden, Families First, Inc., The Atlanta Ballet, Atlanta
History Center, Atlanta Music Festival Association and Woodruff
Arts Center; and he was also a Trustee of The Taft School.
Previously, Mr. Green served as the Chairman of HBO & Company;
and as a Director of Cumulus Media Inc. The Board believes that Mr.
Green’s background as the co-founder of several investment
funds, his service as a chief executive officer of several
companies, his background as a corporate attorney and his service
as a director for several other private and public companies,
provides him with the industry, financial, legal, and leadership
experience to advise the Board on strategic and tactical
matters. Mr. Green’s son, Holcombe Green, III,
will also serve as a director on the post-Merger Fusion
Board.
Holcombe Green, III
Mr.
Green, III has been a Managing Director at Lazard Frѐres
& Co. LLC (“Lazard”) in New York City since January
2008. He has served as the global head of the secondary advisory
business at Lazard and a senior member of the private fund advisory
business since January 2007. Mr. Green, III joined Lazard in
January 2004. From January 2002 through January 2003, Mr. Green was
Director of Corporate Development at IBM Corporation, with
responsibilities including the origination and execution of
strategic transactions with and for IBM Global Services, then the
largest division of IBM. From 1997 until 2002, Mr. Green was an
investment banker at Merrill Lynch & Co. advising clients in
the technology, industrial and consumer sectors with regard to
strategic and financing transactions. Prior to attending the Yale
School of Management, Mr. Green worked in the United States Senate
in the office of Senator Sam Nunn of Georgia. The Board believes
that Mr. Green’s background as an investment banker,
financial and leadership experience to advise the Board on
strategic and tactical matters. He is a trustee of The Taft
School and a member of the Advisory Board of the Yale University
International Center for Finance. Mr. Green’s father,
Holcombe Green, Jr., will also serve as a director and as Vice
Chairman of the post-Merger Fusion Board.
Lewis Dickey, Jr.
Upon
consummation of the Merger, Mr. Dickey will be appointed as a
Director. Since May 2017, Mr. Dickey has served as the
Chairman and Chief Executive Officer of Modern Media Acquisition
Corp., a Nasdaq listed special purpose acquisition corporation.
Since September 2010, Mr. Dickey has served as Chairman of the
Board of Modern Luxury Media, a regional magazine publishing
company and since May 2017 he has also served as its Chief
Executive Officer. From March 2000 to September 2015,
Mr. Dickey served as Chief Executive Officer of Cumulus Media,
Inc., a leader in the radio broadcasting industry which owns and
operates a nationwide radio network. Mr. Dickey also served
Chairman of the Board of Cumulus Media Inc. from December 2000 to
May 2015. Prior to co-founding Cumulus in 1997,
Mr. Dickey was a nationally regarded consultant on media
strategy. The Board believes that Mr. Dickey’s background as
the co-founder of a media company, his service as the chairman and
chief executive officer of several companies, provides him with the
industry, financial, legal, and leadership experience to advise the
Board on strategic and tactical
matters. Mr. Dickey’s qualifications to serve
as a post-Merger Director include over thirty years of experience
in the media, entertainment and marketing services
industries.
Rafe
de la Gueronniere
Upon
consummation of the Merger, Mr. Rafe de la Gueronniere will be
appointed as a Director. Mr. de la Gueronniere has served as a
director of Third Point Reinsurance Ltd. since November 2013. From
March 2014 to March 2017, Mr. de la Gueronniere served as
co-chairman of Continuity Logic, LLC, a software company. From
March 2013 through March 2014, Mr. de la Gueronniere served as Vice
Chairman of New Providence Asset Management, a money management
company that he co-founded in 2003. Prior to co-founding New
Providence Asset Management, Mr. de la Gueronniere was a Principal
at the Mariner Investment Group, Chairman of the Discount
Corporation of New York, and a Member of the Management Committee
and Board at Paine Webber, Inc. Mr. de la Gueronniere began his
career at J.P. Morgan & Co. where he was a Senior Vice
President responsible for the fixed income and precious metals
businesses. Currently, Mr. de la Gueronniere is a member of the
Investment Committee of the John D. and Catherine T. MacArthur
Foundation. He formerly served as a Trustee and Investment
Committee Chair for both the Taft School and the Far Hills Country
Day School and was a longstanding member of the U.S. Treasury Debt
Management Advisory Committee. Mr. de la Gueronniere has more than
35 years of experience in fixed income, equity investing, foreign
exchange, and the precious metals business. The Board believes that
Mr. de la Gueronniere’s experience in the investment and
banking industries gained over a career spanning more than 30
years, his service as the vice-chairman for several companies and
his service as a director for another public company, provides him
with the financial and leadership experience to be a valuable
advisor to executive management and the
Board.
Kevin Dotts
Mr.
Dotts will serve as Chief Financial Officer and Principal
Accounting Officer of the Company post-Merger. Mr. Dotts currently
serves as Executive Vice President and Chief Financial officer of
Birch, positions that he assumed in February 2017. Prior to joining
Birch, Mr. Dotts served as a financial consultant to Internap
Corp., a cloud, hosting and colocation company, from December 2016
to January 2017 and from August 2012 to December 2016, as its
Senior Vice President and Chief Financial Officer. Prior to joining
Internap, Mr. Dotts served as Executive Vice President and Chief
Financial Officer at Culligan International Company, from May 2011
to August 2012, as Chief Financial Officer of Gas Turbine
Efficiency, a global energy technology development company, from
November 2009 to April 2010 and from 2004 to 2009 served as
Executive Vice President and Chief Financial Officer at EarthLink,
Inc. Mr. Dotts started his career with financial leadership roles
in various domestic and international divisions of General Electric
Co.
Terms of Office
The
post-Merger directors and officers will be appointed as of the
effective time of the Merger. Officers will serve until their
respective successors are duly elected and qualified or until their
respective earlier resignation or removal in accordance with our
post-Merger Bylaws. The initial post-Merger directors will serve
until the next annual meeting of our stockholders or until their
respective earlier resignation or removal in accordance with our
post-Merger Bylaws.
Family Relationships
Marvin
Rosen, our current Chairman of the Board and a post-Merger
director, is the father of Matthew D. Rosen, our current and
continuing Chief Executive Officer, director the post-Merger
Chairman of the Board. Also, Holcombe T. Green, Jr, who will serve
as a director and Vice Chairman of the Board post-Merger is the
father of Holcombe Green, III, who will serve as a post-Merger
director.
Involvement in Certain Legal Proceedings
During
the past ten years, none of our current directors or executive
officers nor the nominees/appointees for those positions has
been:
●
convicted in a criminal proceeding or is subject
to a pending criminal proceeding (excluding traffic violations and
other minor offenses);
●
the
subject of any bankruptcy petition filed by or against the business
of which such person was a general partner or executive officer,
either at the time of the bankruptcy filing or within two years
prior to that time;
●
subject
to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction or
federal or state authority, permanently or temporarily enjoining,
barring, suspending or otherwise limiting, his or her involvement
in any type of business, securities, futures, commodities,
investment, banking, savings and loan, or insurance activities, or
to be associated with persons engaged in any such
activity;
●
found
by a court of competent jurisdiction in a civil action or by the
SEC or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment
has not been reversed, suspended, or vacated;
●
the
subject of, or a party to, any federal or state judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated (not including any
settlement of a civil proceeding among private litigants), relating
to an alleged violation of any federal or state securities or
commodities law or regulation, any law or regulation respecting
financial institutions or insurance companies including, but not
limited to, a temporary or permanent injunction, order of
disgorgement or restitution, civil money penalty or temporary or
permanent cease-and-desist order, or removal or prohibition order,
or any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
●
the
subject of, or a party to, any sanction or order, not subsequently
reversed, suspended or vacated, of any self-regulatory organization
(as defined in Section 3(a)(26) of the Exchange Act), any
registered entity (as defined in Section 1(a)(29) of the Commodity
Exchange Act), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or
persons associated with a member.
We
are not aware of any legal proceeding in which any director or
officer (existing or proposed) or any of their affiliates is a
party adverse to us or has a material interest adverse to
us.
CORPORATE GOVERNANCE
The
summary below reflects the Company’s current policies and
practices relating to corporate governance. Except as specifically
noted below or otherwise in this Information Statement, it is the
intent of the Company that the post-Merger Fusion will continue to
operate in accordance with these policies and procedures until such
time as they may be altered or amended by the Board.
Board Independence
The
Board is currently comprised of eight members, five of which are
“independent” as such term is defined under Rule
5605(a)(2). Messrs. Marvin S. Rosen, Matthew D. Rosen and Philip D.
Turits do not qualify as independent under that rule. Upon the
later of (i) the closing of the Merger, and (ii) the Company
meeting its informational requirements under the Exchange Act,
Messrs. Green, III, Dickey, Del Giudice and de la Gueronniere will
be “independent” directors under Rule
5605(a)(2).
The
Current Board, upon recommendation of the Nominating and
Compensation Committee (the “Compensation Committee”),
has determined that each of Messrs. Green, III, Dickey, Del Giudice
and de la Gueronniere is “independent” as such term is
defined in Rule 5605(a)(2).
Director Attendance at Board, Committee and other
Meetings
Directors
are expected to attend Board meetings and meetings of the
committees on which they serve, with the understanding that on
occasion a director may be unable to attend a meeting. The Board
does not have a policy on director attendance at the
Company’s annual meeting.
During
2017, the Board held fourteen meetings all of which were
telephonic, the Compensation Committee held six telephonic
meetings, and the Audit Committee (the “Audit
Committee”) held four meetings. All incumbent directors,
other than Jack Rosen and William Rubin, attended at least 75% of
the total meetings of the Board; and all directors attended at
least 75% of the total meetings of the committees on which they
served.
Board Role in Risk Oversight
The
Board has overall responsibility for risk oversight, with a
particular focus on those areas of risk that might have the most
significant impact on the Company. These risk oversight
responsibilities are primarily discharged through the Audit
Committee and the Compensation Committee. The roles of these
committees in risk evaluation are as follows:
Audit
Committee. The Audit
Committee oversees the risk management policies and practices
related to the financial reporting process and to our published
financial statements. In addition, the Audit Committee from time to
time reviews those risk management policies and practices with
executive management and our auditors, to insure full compliance
and the minimization of finance-related risks.
Compensation
Committee. The
Compensation Committee oversees the risk management policies and
practices related to compensation and compensation-related risks,
as well as possible risks related to succession planning. This
oversight responsibility specifically includes working with
executive management in relation to employee compensation policies,
practices and programs.
Our
executive officers direct the day-to-day implementation and
monitoring of the management policies and practices established by
the Board and its committees. As part of its periodic meetings
with executive management, the Board reviews the Company’s
risk management policies and practices.
Committees of the Board
Following completion of the Merger, the Board will
have two standing committees: the Audit Committee and the
Compensation Committee. Each of these committees is, and upon
consummation of the Merger will be, solely comprised of and chaired
by independent directors, each of whom the Board affirmatively
determined is independent pursuant to Rule 5605(a)(2). These two
committees operate pursuant to its charter. The charters are
reviewed periodically. The charters for these committees are
available on the Company’s website at www.fusionconnect.com by
following a link to “Investors” and then to
“Corporate Governance” and then to “Governance
Docs.” The Board also currently has a Strategic and
Investment Banking Committee that will be eliminated at the closing
of the Merger.
Audit Committee
The
Audit Committee’s primary function is to assist the Board in
fulfilling its oversight responsibilities by reviewing the
integrity of the Company’s financial statements, its internal
control systems, its auditing, accounting and financial reporting
processes (including those associated with the Sarbanes-Oxley Act
of 2002) and the qualification and independence of its independent
accountants. The Audit Committee’s primary duties are
to:
●
serve
as an independent and objective party to monitor Fusion’s
quarterly and annual financial reporting process and the adequacy
of its internal control systems;
●
review
and appraise the audit efforts of the independent accountants;
and
●
provide
an open avenue of communication among the independent accountants,
financial and senior management and the Board.
To
fulfill its responsibilities and duties, the Audit
Committee:
●
reviews
and discusses with management and the independent accountants the
Company’s annual audited financial statements and any reports
or other financial information submitted to any governmental body
or to the public;
●
reviews
with management and the independent accountants the Company’s
quarterly financial statements prior to the filing of the
Company’s Quarterly Reports on Form 10-Q or prior to release
of earnings for the quarter;
●
reviews
and approves any related-party transactions;
●
appoints
and replaces the independent accountants and approves the
professional fees to be paid to the independent accountants,
including the range of audit and non-audit fees;
●
reviews
with the independent auditors all critical accounting policies and
practices being used by the Company;
●
ensures
the independence of the independent accountants by preapproving all
auditing and non-audit services to be performed for the Company,
ensure the rotation of audit partners as required by law, and
discusses with the independent accountant’s the matters
required to be discussed by applicable auditing
standards;
●
reviews
any significant disagreements among management and the independent
accountants in connection with the preparation of the
Company’s financial statements;
●
establishes
procedures relating to the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding
questionable accounting and auditing matters; and
●
establishes,
reviews and updates periodically the Company’s Code of Ethics
to ensure that management has established a system to monitor and
enforce the Code of Ethics.
The
Audit Committee of the post-Merger Company is expected to retain
these duties and responsibilities following completion of the
Merger.
During
2017, the members of our Audit Committee were Paul C. O’Brien
– Chairman, Michael Del Giudice and Larry Blum, each of whom
was a non-employee member of the Board. The Board has determined
that Michael Del Giudice is the Audit Committee Financial Expert
within the meaning of SEC rules. The Board has also determined that
each of the directors serving on the Audit Committee is independent
within the meaning of Rule 5605(a)(2).
Compensation Committee
The
primary functions of the Compensation Committee are
to:
●
evaluate
and assess, on an annual basis, the performance of the Chief
Executive Officer;
●
make
recommendations to the Board regarding base salaries, annual
incentive awards (equity and/or cash) and long-term incentive
awards for the Chief Executive Officer and, in consultation with
the Chief Executive Officer, for other executive
officers;
●
establish
performance objectives for executive officers under our incentive
compensation plans with particular consideration to appropriate
levels of risk-taking incentives;
●
make
recommendations to the Board regarding employment agreements,
severance agreements, change in control agreements and similar
arrangements;
●
retain
compensation consultants to be used to assist in the evaluation of
the compensation of the Chief Executive Officer and other executive
officers and obtain advice and assistance from internal and outside
legal, accounting or other advisors;
●
review
and recommend to the Board the nominees for election as directors
and assist the Board in identifying and attracting qualified
candidates;
●
periodically
review and assess the adequacy and levels of director compensation;
and
●
periodically
review succession plans for key executive officer
positions.
The
Compensation Committee of the post-Merger Company is expected to
retain these duties and responsibilities following completion of
the Merger.
During
2017, the members of the Compensation Committee were Michael J. Del
Giudice – Chairman, Paul C. O’Brien and Larry Blum,
each of whom is a non-employee member of the Board. The Board has
determined that each of these directors is independent within the
meaning of Rule 5605(a)(2).
Stockholder Nomination of Directors
The
Compensation Committee currently does not have a formal procedure
with regard to the consideration of candidates recommended by
Fusion’s stockholders. The Board believes that such a
procedure may make sense and continues to investigate various
procedural options.
Director Qualifications
The
Compensation Committee used the following procedures and guidelines
contained in its charter to evaluate and recommend the directors
included in this Information Statement:
●
recommend
to the Board and aid in identifying and attracting qualified
candidates to stand for election as directors;
●
periodically
evaluate the desirability of and recommend to the Board any changes
in the size and composition thereof; and
●
select
and evaluate directors in accordance with the general and specific
criteria set forth below: General
Criteria: Director selection should include a sufficient
number of independent directors to satisfy existing SEC and
exchange requirements, and such independent directors should have
the appropriate skills, experience and other characteristics to
fill all committee positions required to be filled by independent
directors; Specific
Criteria: In addition to the general criteria, the
Compensation Committee shall develop and periodically evaluate and
modify, as appropriate, a set of specific criteria outlining the
skills, experience, particular areas of expertise, specific
backgrounds and other characteristics that should be represented on
the Board to enhance the effectiveness of the Board and its
committees, taking into account any particular needs of the Company
based on its business, size, strategic objectives, customers and
other characteristics;
●
evaluate
each new director candidate and each incumbent director before
recommending that the Board nominate or re-nominate such individual
for election or reelection as a director based on the extent to
which such individual meets the general and specific criteria
above;
●
diligently
seek to identify potential candidates who will strengthen the
Board, by establishing procedures for soliciting and reviewing
potential nominees from directors and stockholders;
and
●
submit
to the Board the candidates for director to be recommended by the
Board for election at each annual meeting of stockholders and to be
added to the Board at any other time due to board expansion,
director resignations, retirements or otherwise.
Strategic and Investment Banking Committee
The
members of the Company’s Strategic and Investment Banking
Committee are Marvin S. Rosen, Michael Del Giudice and Philip D.
Turits. The Strategic Committee evaluates and recommends investment
strategies with investment banks and brokerage houses and assists
in the evaluation of potential mergers and acquisitions candidates.
The Strategic and Investment Banking Committee does not have a
written charter. The Strategic Committee acts at the direction of
the Board. The Strategic Committee held no meetings in 2017. This
committee will be eliminated at the closing of the
Merger.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Exchange Act requires that every person who is
directly or indirectly the beneficial owner of more than 10% of any
class of any equity security (other than an exempted security)
which is registered pursuant to Section 12 of the Exchange Act, or
who is a director or an officer of the issuer of such security,
file the ownership reports required by Section 16 of the Exchange
Act.
Based
solely upon the Company’s review of Forms 3 and 4 and
amendments thereto furnished to it during or with respect to its
most recent fiscal year, and Forms 5 and amendments thereto
furnished to it with respect to its most recent fiscal year and any
written representation from a reporting person (as defined in Item
405 of Regulation S-K) that no Form 5 is required, during the
Company’s most recent fiscal year the following Section 16
officers, directors and beneficial owners of more than 10% of any
class of our equity securities failed to timely file one form each:
Mr. Turits failed to timely file one Form 4 reporting two
transactions and Apptix ASA failed to timely file its Form
3.
EXECUTIVE COMPENSATION
The
following table summarizes the compensation paid or earned by or
awarded to our Principal Executive Officer and the next two highest
compensated executive officers.
Name
and
|
|
|
|
|
|
|
|
|
Principal
Position(1)
|
|
Year
|
|
|
|
|
|
|
Matthew D.
Rosen,
|
|
2017
|
$425,000
|
$212,500
|
$-
|
$1,703,930
|
$1,917
|
$2,343,847
|
Chief Executive
Officer
|
|
2016
|
$425,000
|
$350,000
|
$-
|
$259,230
|
$2,102
|
$1,036,332
|
|
|
|
|
|
|
|
|
Gordon Hutchins,
Jr.,
|
|
2017
|
$275,000
|
$-
|
$-
|
$-
|
$424
|
$275,424
|
President &
Chief Operating Officer
|
|
2016
|
$275,000
|
$60,000
|
$-
|
$72,584
|
$456
|
$408,040
|
|
|
|
|
|
|
|
|
Michael R.
Bauer,
|
|
2017
|
$250,000
|
$-
|
$-
|
$-
|
$517
|
$250,717
|
Chief Financial
Officer
|
|
2016
|
$179,006
|
$41,000
|
$99,550
|
$57,031
|
$468
|
$377,055
|
______________________
(1)
Included in these
columns are amounts earned, though not necessarily paid to the
Named Executive Officer, during the corresponding fiscal year.
Named Executive Officers consists of: (i) our Principal Executive
Officer regardless of compensation level, and (ii) our two most
highly compensated executive officers (other than our Principal
Executive Officer), who were serving as such on December 31, 2017
and whose total 2017 compensation exceeded $100,000.
(2)
In the first
quarter of 2018, in connection with the completion of the public
offering of our common stock in January 2018, Mr. Rosen, Mr.
Hutchins and Mr. Bauer received a bonus payment in the amount of
$187,500, $60,000 and $40,000, respectively.
(3)
Reflects 55,000
shares of the Company's common stock that vest ratably over a
period of three years that Mr. Bauer received in connection with
his appointment as Chief Financial Officer.
(4)
Reflects the dollar amount recognized for
financial statement reporting purposes for the fiscal years ended
December 31, 2017 and 2016, for restricted stock and option awards.
The value attributable to restricted share and option awards is
computed based on aggregate grant date fair value in accordance
with Financial Accounting Standards Board ASC Topic 718, and the
assumptions made in the valuations of the restricted shares and
option awards are included in Note 2 (Summary of Significant
Accounting Policies – Stock Based Compensation) of the notes
to our consolidated financial statements for the year ended
December 31, 2017 included in our Form 10-K filed with the SEC on
March 22, 2018. Pursuant to SEC rules, the amounts shown exclude
the impact of estimated forfeitures related to service-based
vesting conditions.
(5)
Represents life
insurance premiums paid by us.
Employment Agreements, Termination of Employment and
Change-In-Control Arrangements
On
November 5, 2015, we executed an employment agreement with Matthew
D. Rosen, our Chief Executive Officer. The term of Mr. Rosen's
employment agreement with the Company will expire on October 31,
2018. The Company and Mr. Rosen intend to negotiate and enter into
a new employment agreement to take effect upon expiration of such
existing contract, or sooner. Mr. Rosen’s employment
agreement provides (a) for an annual base salary of not less than
$425,000 (subject to annual review for cost of living increases,
performance and market conditions), (b) for an annual bonus equal
to at least 50% of base salary if the Company achieves positive
adjusted EBITDA, and (c) that in the event his employment is
terminated (1) by the Company without “cause” (as
defined in his employment agreement), or (2) by Mr. Rosen for
“good reason” (as defined in his employment agreement),
including as a result of a resignation by Mr. Rosen for any reason
within six months following a change in control of the Company (as
defined in his agreement), he will receive unpaid base salary
accrued through the effective date of the termination plus any
pro-rata bonus that would be payable had he completed a full year
of employment and a lump sum payment (within 30 days of the
effective date of said transaction) equal to 200% of his base
salary then in effect and 200% of his highest annual bonus for
the three years preceding his termination. In addition,
upon any such termination of employment, all stock options held by
Mr. Rosen would vest in full. Mr. Rosen’s employment
agreement also provides that the Company will cooperate in good
faith to afford Mr. Rosen the right to exercise his stock options
in full immediately prior to a change in control.
Mr.
Rosen’s employment agreement also includes a one year
non-disclosure, employee non-solicitation and non-compete
provisions.
In the event of a sale of the Company or
substantially all of the assets of the Company and its subsidiaries
for cash or securities or a combination thereof, Mr. Rosen is
entitled to a one-time bonus equal to the following: (i) if the
Company’s stockholders receive
aggregate consideration of
up to $149,999,999, Mr. Rosen is entitled to receive a special
bonus equal to 2.5% of such consideration paid/distributed to the
Fusion stockholders; (ii) 3.5% of such consideration if such
consideration is between $150 million and $249,999,999; (iii) 4.5%
if such consideration is between $250 million and $349,999,999; and
(iv) 5% if such consideration exceeds $350
million. The Compensation Committee, with
advice of counsel, has determined that the proposed
merger between the Company and Birch Communications Holdings, Inc.
does not trigger the payment of the one-time bonus contemplated by
this provision of Mr. Rosen’s employment agreement. That
fact notwithstanding, and considering that the structure of the
BCHI transaction was not contemplated by the terms of Mr.
Rosen’s employment agreement, the Compensation
Committee has determined that a special one-time transaction bonus
is warranted and it intends to retain the services of an outside
compensation consultant to determine the appropriate bonus
amount. Such bonus would be
subject to the approval of the Board and BCHI and is contingent
upon the closing of the merger with Birch
Communications.
Mr. Rosen’s employment agreement also provides that the Board
will, within ninety (90) days following execution of the employment
agreement, develop a plan that enables Mr. Rosen to obtain a five
percent (5%) equity stake in the Company within three years from
the date of his employment agreement. On November 13, 2017, the
Board granted and Mr. Rosen agreed to accept options to purchase
822,298 shares of Fusion Common Stock in satisfaction of this
obligation, two thirds of these options vest on the date of grant
and the remaining one-third vested on February 3, 2018. The
exercise price of these options, which is $2.51, was set at the
closing price of our common stock on November 10, 2017 (the last
trading day before the grant was approved by the
Board).
In
2016, the Company declared a special bonus to Mr. Rosen in the
amount of $535,500 for bonus amounts due but not paid by the
Company for periods prior to 2014.
Gordon
Hutchins Jr. serves as our President and Chief Operating
Officer. Mr. Hutchins does not have a written employment
agreement with the Company. Effective January 1, 2015, Mr.
Hutchins’ annual salary was increased to $275,000. Mr.
Hutchins is entitled to receive a bonus of up to 25% of his annual
salary if the Company achieves designated corporate performance
metrics.
Michael
R. Bauer serves as our Chief Financial Officer. Mr. Bauer does not
currently have a formal employment agreement with the Company.
However, his offer letter provides that his annual salary is
$250,000 and he is entitled to receive a bonus of up to 25% of his
annual salary if the Company achieves designated corporate
performance metrics. In connection with his appointment as Chief
Financial Officer, in 2016 Mr. Bauer received a grant of 55,000
generally restricted shares of our common stock, which shares vest
ratably over a three year period and which shares (along with stock
options granted to Mr. Bauer) vest in the event of a change in
control of the Company (as defined in his offer letter). In the
event Mr. Bauer’s employment is terminated (i) within six
months following a change in control, except for
“Cause” (as defined in his offer letter), or (ii) by
the Company “Without Cause” (as defined in his offer
letter), or (iii) due to a resignation by Mr. Bauer for “Good
Reason” (as defined in his offer letter) then the Company is
obligated to pay him severance in an amount equal to salary and the
cost of health benefit continuation for a period of six months (in
a lump sum or installments, at the election of the
Company).
Determination of Executive Compensation
The
compensation of our Chief Executive Officer is determined by the
Compensation Committee. The compensation of our other
executive officers is determined by the Compensation Committee, in
consultation with the Chief Executive Officer. In determining the
levels and forms of compensation to be paid to our executive
officers, the Compensation Committee considers overall Company
performance, departmental or business segment performance,
individual executive performance and experience, internal equity
with regard to other executive positions, general economic
conditions, and typical levels and forms of compensation at
similarly-sized companies with business models similar to
ours.
In
considering levels and forms of compensation at other companies,
the Compensation Committee relies not only on its own knowledge,
but also on published salary reviews and compensation studies for
companies with business models similar to ours, for specific
executive positions and for industry in general.
Our
goal is to provide each of our executive officers with a total
compensation package (base salary, the potential for a
performance-based annual cash bonus, and time-based equity
incentives) that is competitive. We endeavor to appropriately
balance the levels of fixed compensation and “at risk”
compensation, as well as the levels of cash compensation and equity
incentives.
In
addition to cash-based and equity-based compensation, our executive
officers are eligible to participate in the benefit programs that
are offered to all of our employees, including medical insurance,
dental insurance, life insurance, a 401(k) plan, and a variety of
other elective benefit plans. We do not offer perquisites or
other significant benefits to our executive officers that are not
otherwise available to all of our employees.
2017 Director Compensation
Our
Directors do not receive cash compensation for their services on
the Board or committees. However, they are reimbursed for
out-of-pocket expenses incurred in attending Board and committee
meetings. In addition, until 2017, we annually granted
Directors stock options for their services, the amount of which was
determined by the Compensation Committee. Due to the pending merger
with Birch Communications Holdings, Inc., no options were granted
to the directors in 2017.
The
following table provides information relating to compensation paid
to the directors for the 2017 fiscal year.
Name
|
Fees Earned Or
Paid In Cash ($)
|
|
|
Non-Equity
Incentive Plan Compensation
|
Change in
Pension Value and Nonqualified Deferred Compensation
Earnings
|
All Other
Compensation ($)
|
|
Marvin S.
Rosen
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
Michael J. Del
Giudice
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
Jack
Rosen
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
Paul C.
O'Brien
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
Philip D.
Turits
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
William
Rubin
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
Larry
Blum
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
$-
|
__________________
(1)
The table does not
include amounts reimbursed for expenses incurred in attending Board
and committee meetings.
2016 Equity Incentive Plan
On
October 28, 2016, our stockholders approved the 2016 Fusion
Telecommunications International, Inc. 2016 Equity Incentive Plan
(the “2016 Plan”), which was previously adopted by the
Board on August 22, 2016. The 2016 Plan provides for the grant of
incentive stock options, non-qualified stock options, stock
appreciation rights (“SARs”), restricted stock,
restricted stock units, stock grants, stock units, performance
shares, performance share units and performance cash (collectively
“awards”). The 2016 Plan also permits the grant of
awards that are intended to qualify for the
“performance-based compensation” exception to the $1.0
million limitation on the deduction of compensation imposed by
Section 162(m) of the Internal Revenue Code of 1986, as
amended. The 2016 Plan supersedes and replaces the 2009 Plan
(as defined below), which plan remains in effect solely with
respect to outstanding awards that have not been exercised,
forfeited, canceled, expired or otherwise terminated. The 2016 Plan
provides a long-term, equity-based incentive designed to assist our
retention of key personnel, align the interests of our Directors,
executive officers and employees with those of our stockholders and
focus participants on the achievement of long-term business
objectives that will increase share value.
The
total number of shares of common stock reserved under the 2016 Plan
is an amount equal to ten percent (10%) of our shares outstanding
from time-to-time on a fully-diluted basis, plus shares from
any award granted under the 2009 Plan that terminates, expires or
lapses in any way following the effective date of the 2016 Plan. In
addition, the 101,749 shares not granted under the 2009 Plan
are also available for grant under the 2016 Plan. Subject to
the express provisions of the 2016 Plan, if any award granted under
the 2016 Plan terminates, expires, or lapses for any reason, or is
paid in cash, any stock subject to or surrendered will again be
stock available for the grant of an award under the 2016 Plan. The
exercise of a stock-settled SAR, or broker-assisted
“cashless” exercise of an option (or a portion thereof)
will reduce the number of shares of our common stock available for
issuance pursuant to the 2016 Plan by the entire number of shares
of our common stock subject to that SAR or option (or applicable
portion thereof), even though a smaller number of shares of our
common stock will be issued upon such an exercise. Also, shares of
our common stock tendered to pay the exercise price of an option or
tendered or withheld to satisfy a tax withholding obligation
arising in connection with an award will not become available for
use under the 2016 Plan.
The
2016 Plan contains the following provisions, which the Company
believes reflect best practices for equity-compensation plans: (i)
prohibits the grant of stock options and SARs with discounted
exercise prices, (ii) prohibits the repricing of stock options and
SARs without stockholder approval, (iii) prohibits the
recycling of awards tendered in payment of an option or withheld to
satisfy tax obligations; (iv) contains a definition of change in
control whereby potential acceleration of awards will only occur in
the event of an actual change in control transaction; (v) includes,
as a general rule, double-trigger vesting following a change in
control; and (vi) imposes a $500,000 limit on the value of awards
that may be granted to any one participant who is a non-employee
director during any 12-month period.
The
2016 Plan is administered by the Compensation
Committee. The Compensation Committee determines, from
time to-time, those of our executive officers, Directors and
employees to whom awards will be granted, the amount of the awards
granted to each individual, the vesting schedule of the awards and
all other terms and conditions of the award. As of March 9, 2018,
the Company had granted options to purchase 1,920,348 shares of our
common stock under the 2016 Plan. No other forms of awards have
been granted.
2009 and 1998 Stock Option Plans
On
December 17, 2009, the stockholders approved and ratified our 2009
Stock Option Plan (the “2009 Plan”), which was
previously adopted by the Board in March 2009. This plan
replaced our 1998 Stock Option Plan, the term of which expired as
to new option grants.
The
number of shares reserved for issuance under the 2009 Plan was
1,260,000. The 2009 Plan is administered by the
Compensation Committee. As of March 9, 2018, there were
outstanding options to purchase 1,082,449 shares of common stock
under the 2009 Plan. Options to purchase 15,130 shares of common
stock also remain outstanding under the now expired 1998 Stock
Option Plan, with such options expiring at various dates through
2020.
Outstanding Equity Awards at Year End
The
following table provides information concerning unexercised options
and stock awards that have not vested for each Named Executive
Officer as of December 31, 2017. The table gives effect to the
1:50 reverse split completed by us in May 2014.
|
|
|
|
|
Name
|
Number of
securities underlying unexercised options (#)
exercisable
|
Number of
securities underlying unexercised options (#)
unexercisable
|
Equity
incentive plan awards; Number of securities underlying unexercised
unearned options (#)
|
Option exercise prices
($)
|
|
|
|
Number of shares or units of stock that have
not vested (#)
|
Market value of shares or units of stock that
have not vested ($)
|
Equity incentive plan awards; Number of
unearned shares, units or other rights that have not vested
(#)
|
Equity incentive plan awards; Market or Payout
Value of unearned shares, units or other rights that have not
vested (#)
|
Matthew D.
Rosen
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000
|
-
|
-
|
$15.50
|
3/26/2008
|
|
3/26/2018
|
-
|
-
|
-
|
-
|
|
7,000
|
-
|
-
|
$5.50
|
3/26/2009
|
|
3/26/2019
|
-
|
-
|
-
|
-
|
|
8,750
|
-
|
-
|
$6.00
|
4/14/2010
|
|
4/14/2020
|
-
|
-
|
-
|
-
|
|
8,750
|
-
|
-
|
$4.50
|
10/19/2011
|
|
10/19/2021
|
-
|
-
|
-
|
-
|
|
10,000
|
-
|
-
|
$5.50
|
10/17/2012
|
|
10/17/2022
|
-
|
-
|
-
|
-
|
|
71,236
|
-
|
-
|
$4.25
|
7/29/2013
|
|
7/29/2023
|
-
|
-
|
-
|
-
|
|
80,000
|
-
|
-
|
$3.52
|
10/17/2014
|
|
10/17/2024
|
-
|
-
|
-
|
-
|
|
66,667
|
33,333
|
-
|
$2.13
|
10/7/2015
|
|
10/6/2025
|
-
|
-
|
-
|
-
|
|
85,000
|
165,000
|
-
|
$1.26
|
11/5/2016
|
|
11/11/2026
|
-
|
-
|
-
|
-
|
|
550,940
|
271,358
|
-
|
$2.51
|
11/9/2017
|
|
11/9/2017
|
-
|
-
|
-
|
-
|
Total
|
909,343
|
469,718
|
-
|
|
|
|
|
-
|
-
|
-
|
-
|
Gordon
Hutchins, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
-
|
-
|
$15.50
|
3/26/2008
|
|
3/26/2018
|
-
|
-
|
-
|
-
|
|
4,000
|
-
|
-
|
$5.50
|
3/26/2009
|
|
3/26/2019
|
-
|
-
|
-
|
-
|
|
5,000
|
-
|
-
|
$6.00
|
4/14/2010
|
|
4/14/2020
|
-
|
-
|
-
|
-
|
|
6,500
|
-
|
-
|
$4.50
|
10/20/2011
|
|
10/19/2021
|
-
|
-
|
-
|
-
|
|
6,500
|
-
|
-
|
$5.50
|
10/17/2012
|
|
10/17/2022
|
-
|
-
|
-
|
-
|
|
20,342
|
-
|
-
|
$4.25
|
7/29/2013
|
|
7/29/2023
|
-
|
-
|
-
|
-
|
|
25,000
|
-
|
-
|
$3.52
|
10/17/2014
|
|
10/17/2024
|
-
|
-
|
-
|
-
|
|
23,450
|
11,550
|
-
|
$2.13
|
10/7/2015
|
|
10/6/2025
|
-
|
-
|
-
|
-
|
|
23,800
|
46,200
|
-
|
$1.26
|
11/5/2016
|
|
11/11/2026
|
|
|
|
|
Total
|
118,592
|
57,750
|
-
|
|
|
|
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael R.
Bauer
|
18,700
|
36,300
|
-
|
$1.26
|
11/11/2016
|
|
11/11/2026
|
36,300
|
$65,703(1)
|
-
|
-
|
Total
|
18,700
|
36,300
|
-
|
|
|
|
|
36,300
|
$65,703(1)
|
-
|
-
|
(1)
The value
attributed to the restricted shares issued to Mr. Bauer is computed
in accordance with FASB ASC Topic 718. Pursuant to SEC rules, the
amounts shown exclude the impact of estimated forfeitures related
to service-based vesting conditions. All options vest ratably over
three years from their grant date subject to acceleration in
certain circumstances.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table presents information regarding the beneficial
ownership of each class of our voting securities as of March 9,
2018 by:
●
each
person who beneficially owns more than 5% of our voting
securities;
●
each
of our Directors and named executive officers (as defined in Item
402(m)(2) of Regulation S-K) individually; and
●
all
executive officers and Directors as a group.
The
Company’s voting securities consist of our common stock and
our Series B-2 Preferred Stock, which generally vote as a single
class on all matters. Each share of our common stock is
entitled to one vote per share. Each share of our Series
B-2 Preferred is entitled to 200 votes (which represents the number
of shares of our common stock into which each share of our Series
B-2 Preferred Stock is convertible. As of March 9, 2018, the total
number of voting securities issued and outstanding (“Voting
Shares”) was 37,423,127 consisting of (a) 35,579,756 Voting
Shares evidenced by 35,579,756 shares of our common stock, and (b)
1,834,200 Voting Shares evidenced by 9,171 shares of Series B-2
Preferred Stock. When the Merger closes, all outstanding shares of
preferred stock will be converted into shares of our common stock
prior to the effective time of the Merger in accordance with their
respective terms or, if not so converted, will be cancelled
immediately prior to the consummation of the Merger.
Unless
otherwise indicated, the address of each beneficial owner in the
following table is c/o Fusion Telecommunications International,
Inc., 420 Lexington Avenue, Suite 1718, New York, NY 10170. We
believe that all persons, unless otherwise noted, named in the
following table have sole voting and investment power with respect
to all Voting Shares shown as being owned by them. Under U.S.
securities laws, a person is considered to be the beneficial owner
of securities owned by him/her (or certain persons whose ownership
is attributed to him/her) and that can be acquired by him/her
within 60 days from that date, including upon the exercise of
options, warrants or convertible securities.
We
determine a beneficial owner’s percentage ownership by
assuming that options, warrants or convertible securities that are
held by such owner, but not those held by any other person, and
which are exercisable within 60 days of March 9, 2018, have been
exercised or converted.
|
|
Number of Voting Shares
Beneficially
Owned
|
Percentage of Voting Shares
|
William
Rubin
|
(1)
|
204,334
|
*
|
Matthew D.
Rosen
|
(2)
|
1,319,327
|
5.6%
|
Marvin S.
Rosen
|
(3)
|
2,013,072
|
9%
|
Larry
Blum
|
(4)
|
64,391
|
*
|
Michael J. Del
Giudice
|
(5)
|
74,079
|
*
|
Jack
Rosen
|
(6)
|
126,038
|
*
|
Gordon Hutchins,
Jr.
|
(7)
|
124,838
|
*
|
Paul C.
O’Brien
|
(8)
|
118,432
|
*
|
Philip D.
Turits
|
(9)
|
146,401
|
*
|
Michael R.
Bauer
|
(10)
|
36,666
|
*
|
All Directors and
Executive Officers as a Group (15 persons)
|
|
4,841,637
|
13.4%
|
*Less
than 1% of outstanding shares.
________________________
(1)
|
Includes
(i) 11,150 shares of Fusion Common Stock issuable upon the exercise
of options, (ii) 200 shares of Series B-2 Preferred Stock
convertible into 40,000 shares of Fusion Common Stock; and (iii)
20,132 shares of Fusion Common Stock issuable upon the exercise of
Fusion Common Stock purchase warrants.
|
(2)
|
Includes
1,167,134 shares of Fusion Common Stock issuable upon the exercise
of options, (ii) 14,695 shares of Fusion Common Stock issuable upon
the exercise of Fusion Common Stock purchase warrants; (iii) 76
shares of Series B-2 Preferred Stock convertible into 15,200 shares
of Fusion Common Stock; and (iv) 50 shares of Series A-1 Preferred
Stock and 5 shares of Series A-2 Preferred Stock convertible into a
total of 823 shares of Fusion Common Stock.
|
(3)
|
Includes
(i) 230,158 shares of Fusion Common Stock issuable upon the
exercise of Fusion Common Stock purchase warrants, (ii) 11,500
shares of Fusion Common Stock issuable upon the exercise of
options, (iii) 722 shares of Series B-2 Preferred Stock convertible
into 144,400 shares of Fusion Common Stock; (iv) 1,610 shares of
Fusion Common Stock held by a Delaware Trust Custodian IRA of Mr.
Rosen; and (v) 50 shares of Series A-1 Preferred Stock and 25
shares of Series A-2 Preferred Stock convertible into a total of
1,375 shares of Fusion Common Stock.
|
(4)
|
Includes
(i) 42,185 shares of Fusion Common Stock held by trusts for which
his wife serves as trustee, (ii) 4,456 shares of Fusion Common
Stock issuable upon the exercise of Fusion Common Stock purchase
warrants held by trusts for which his wife serves as trustee, (iii)
11,150 shares of Fusion Common Stock issuable upon the exercise of
options; and (iv) 33 shares of Series B-2 Preferred Stock
convertible into 6,600 shares of Fusion Common Stock held by trusts
for which his wife serves as trustee.
|
(5)
|
Includes
(i) 11,500 shares of Fusion Common Stock issuable upon the exercise
of options, (ii) 320 shares of Fusion Common Stock issuable upon
the exercise of Fusion Common Stock purchase warrants, (iii) 11,381
shares of Fusion Common Stock held in the name of Catskill Investor
Group, LLC, (iv) 5 shares of Series B-2 Preferred Stock convertible
into 1,000 shares of Fusion Common Stock, and (v) 200 shares of
Series A-1 Preferred Stock and 75 shares of Series A-2 Preferred
Stock owned by Catskill Investor Group, LLC, that are convertible
into a total of 4,811 shares of Fusion Common Stock.
|
(6)
|
Includes
(i) 9,600 shares of Fusion Common Stock issuable upon the exercise
of Fusion Common Stock purchase warrants held in the name of
Rosen-Kaiyuan, LLC, of which Jack Rosen is the managing
member, (ii) 53,868 shares of Fusion Common Stock held by
Rosen Partners, LLC and 12,095 shares of Fusion Common Stock held
by Rosen-Kaiyuan, LLC, (iii) 11,150 shares of Fusion Common Stock
issuable upon the exercise of options, (iv) 150 shares
of Series B-2 Preferred Stock convertible into 30,000 shares of
Fusion Common Stock held in the name of Rosen-Kaiyuan, LLC, and (v)
200 shares of Series A-1 Preferred Stock and 50 shares of Series
A-2 Preferred Stock convertible into a total of 4,121 shares of
Fusion Common Stock.
|
(7)
|
Includes
(i) 118,592 shares of Fusion Common Stock issuable upon the
exercise of options, and (ii) 25 shares of Series A-2 Preferred
Stock convertible into a total of 690 shares of Fusion Common
Stock.
|
(8)
|
Includes
(i) 11,500 shares of Fusion Common Stock issuable upon the exercise
of options, (ii) 3,200 shares of Fusion Common Stock issuable
upon the exercise of Fusion Common Stock purchase warrants, (iii)
50 shares of Series B-2 Preferred Stock convertible into 10,000
shares of Fusion Common Stock, and (iv) 100 shares of Series A-1
Preferred Stock convertible into 1,371 shares of Fusion Common
Stock.
|
(9)
|
Includes
(i) 29 shares of Fusion Common Stock held by his wife, (ii) 320
shares of Fusion Common Stock issuable upon the exercise of Fusion
Common Stock purchase warrants, (iii) 54,834 shares of Fusion
Common Stock issuable upon the exercise of options, (iv) 5 shares
of Series B-2 Preferred Stock convertible into 1,000 shares of
Fusion Common Stock, (v) 25 shares of Series A-1 Preferred
Stock and 30 shares of Series A-2 Preferred Stock convertible into
a total of 1,171 shares of Fusion Common Stock.
|
(10)
|
Reflects
the vested portion of restricted stock.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In
November 2016, Marvin S. Rosen, Chairman of the Company, converted
$250,000 of his outstanding promissory note to the Company into
217,391 shares of our common stock at a price of $1.15 per share.
Of these shares, 21,739 shares were issued at Mr. Rosen's direction
in the name of his son, Matthew D. Rosen, the Company’s Chief
Executive Officer.
In
December 2015, Matthew D. Rosen, converted $25,000 owed to him by
the Company (for a partial bonus payable to him under the terms of
his employment contract) into 11,468 shares of our common stock at
a price of $2.18 per share. See “Executive
Compensation,” included elsewhere in this Information
Statement.
In
December 2015, Marvin S. Rosen converted $300,000 of his
outstanding promissory note to the Company into 137,615 shares of
our common stock at a price of $2.18 per share.
Since
March 6, 2014, the Company has engaged Marcum LLP to prepare the
Company’s tax returns and to provide related tax advisory
services. The Company paid this firm approximately
$205,000 and $135,000 for the years ended December 31, 2017 and
2016, respectively. Larry Blum is a Senior Advisor and a
former partner of Marcum.
WHERE YOU CAN FIND MORE INFORMATION
Fusion
files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports,
statements or other information that we file with the SEC at the
SEC’s public reference room at the following location: 100 F
Street, N.E., Room 1580, Washington, D.C. 20549. You may also
obtain copies of those documents at prescribed rates by writing to
the Public Reference Section of the SEC at that address. Please
call the SEC at (800) SEC-0330 for further information on the
public reference room. These SEC filings are also available to the
public from commercial document retrieval services and at
www.sec.gov. In
addition, stockholders may obtain free copies of the documents
filed with the SEC by Fusion through our website: www.fusionconnect.com.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Information Statement to be signed
on its behalf by the undersigned hereunto duly
authorized.
|
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.
|
|
|
|
By: /s/ James P. Prenetta,
Jr.
|
|
James P. Prenetta, Jr.
|
April 2, 2018
|
Executive Vice President and General
Counsel
|