Blueprint
WEIL,
GOTSHAL & MANGES LLP
767
Fifth Avenue
New
York, New York 10153
Telephone:
(212) 310-8000
Facsimile:
(212) 310-8007
Gary T.
Holtzer
Sunny
Singh
Attorneys for Debtors
and Debtors in Possession
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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X
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In re
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Chapter
11
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FUSION CONNECT, INC., et
al.,
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Case
No. 19-11811 (SMB)
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Debtors.1
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(Jointly
Administered)
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NOTICE OF FILING OF PLAN SUPPLEMENT
IN
CONNECTION WITH THE SECOND AMENDED JOINT
CHAPTER 11 PLAN OF FUSION CONNECT, INC. AND ITS SUBSIDIARY
DEBTORS
PLEASE
TAKE NOTICE THAT
1. On June 3, 2019
(the “Commencement
Date”), Fusion Connect, Inc. and its debtor
subsidiaries, as debtors and debtors in possession in the
above-captioned chapter 11 cases (collectively, the
“Debtors”),
commenced cases under chapter 11 of title 11 of the United States
Code in the United States Bankruptcy Court for the Southern
District of New York (the “Court”).
_________________________
The Debtors
in these chapter 11 cases, along with
the last four digits of each Debtor’s federal tax
identification number, as applicable, are Fusion Connect, Inc.
(2021); Fusion BCHI Acquisition LLC (7402); Fusion NBS Acquisition
Corp. (4332); Fusion LLC (0994); Fusion MPHC Holding Corporation
(3066); Fusion MPHC Group, Inc. (1529); Fusion Cloud Company LLC
(5568); Fusion Cloud Services, LLC (3012); Fusion CB Holdings, Inc.
(6526); Fusion Communications, LLC (8337); Fusion Telecom, LLC
(0894); Fusion Texas Holdings, Inc. (2636); Fusion Telecom of
Kansas, LLC (0075); Fusion Telecom of Oklahoma , LLC (3260); Fusion
Telecom of Missouri, LLC (5329); Fusion Telecom of Texas Ltd.,
L.L.P. (8531); Bircan Holdings, LLC (2819); Fusion Management
Services LLC (5597); and Fusion PM Holdings, Inc. (2478). The
principal executive office of the Debtors is located at 210
Interstate North Parkway, Suite 300, Atlanta, Georgia
30339.
2. On October 7, 2019,
the Debtors filed the Second Amended Joint Chapter 11 Plan of
Fusion Connect, Inc., and its Subsidiary Debtors (ECF No. 455) (as
amended, modified, or supplemented, the “Plan”).2
3. On October 8, 2019,
the Court entered the Order (I) Approving Disclosure Statement and
Notice of Disclosure Statement Hearing, (II) Establishing
Solicitation and Voting Procedures, (III) Scheduling Confirmation
Hearing, (IV) Approving Confirmation Objection Procedures and
Notice of Confirmation Hearing, and (V) Granting Related Relief
(ECF No. 457) (the “Disclosure Statement
Order”).
4. In accordance with
the Plan and Disclosure Statement Order, the Debtors hereby file
this Plan Supplement consisting of the following
documents:
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Exhibit A-1
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New
First Lien Facility Term Sheet3
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Exhibit A-2
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Redline
of New First Lien Facility Term Sheet4
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Exhibit B
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New
Exit Facility Term Sheet5
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Exhibit C
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Special
Warrant Agreement
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Exhibit D
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Litigation
Trust Agreement
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Exhibit E
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Litigation
Trust Loan Agreement
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2
Capitalized terms
used but not otherwise defined herein shall have the meanings
ascribed to such terms in the Plan.
3
On
October 7, 2019, the Debtors filed the Plan, which included the New
First Lien Facility Term Sheet annexed as Exhibit B to the Plan. The
Debtors are continuing to work with the First Lien Lender Group on
the New First Lien Documents.
4
Exhibit A-2 of the Plan
Supplement contains a redline of the New First Lien Facility Term
Sheet against the version filed on October 7, 2019.
5
On
October 15, 2019, the Debtors filed the Motion of Debtors for Authorization to Enter
Into and Perform Obligations Under The Exit Financing Letter With
Exit Financing Lenders (ECF No. 482). The motion attached a
non-binding proposal (the “Exit Financing Letter”) from TSL
Advisers, LLC (“TSL”) and MSD Partners, L.P.
(“MSD”) for TSL,
MSD, and certain other parties acceptable to TSL and MSD to provide
one-hundred percent of the aggregate principal amount of the Exit
Financing on an exclusive basis. The Exit Financing Letter is
attached for reference and remains unchanged from the version filed
on October 15, 2019. The Debtors are continuing to work with TSL
and MSD to reach agreement on a commitment relating to the Exit
Financing.
5. The Plan Supplement
documents attached hereto remain subject to (a) further review,
negotiations, and modifications, and (b) final documentation in a
manner consistent with the Plan.
6. The Debtors may, in
their discretion, update, modify, or supplement the Plan Supplement
in accordance with the terms of the Plan.
7. The Plan Supplement
may be viewed and obtained (a) by accessing the Court’s
website at www.nysb.uscourts.gov, or (b) from the Debtors’
claims and noticing agent, Prime Clerk LLC (“Prime Clerk”),
https://cases.primeclerk.com/Fusion. In addition, a copy of the
Plan Supplement will be provided on request free of charge by
contacting Prime Clerk by calling (844) 230-7218 (domestic
toll-free) or +1 (347) 859-8784 (international) or by emailing
fusionconnectinfo@primeclerk.com.
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Dated:
October
28, 2019
New York, New
York
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/s/ Sunny Singh
WEIL,
GOTSHAL & MANGES LLP
767
Fifth Avenue
New
York, New York 10153
Telephone:
(212) 310-8000
Facsimile:
(212) 310-8007
Gary T.
Holtzer
Sunny
Singh
Attorneys for Debtors
and
Debtors in Possession
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Exhibit A-1
New First Lien Facility Term Sheet
NEW FIRST LIEN CREDIT AGREEMENT
SUMMARY OF TERMS
This
term sheet (the “New First
Lien Term Loan Term Sheet”) is Schedule 2 to the
Restructuring Support Agreement Term Sheet (the “Term Sheet”). Capitalized terms
used but not defined herein have the meanings given to them in the
Term Sheet attached to the Restructuring Support Agreement as
Exhibit B and the Restructuring Support Agreement, as
applicable.
This
New First Lien Term Loan Term Sheet sets forth the principal terms
of a potential takeback first lien term loan facility (the
“New First Lien Credit
Facility”; the credit agreement evidencing the New
First Lien Credit Facility, the “New First Lien Credit Agreement”
and, together with the other definitive documents governing the New
First Lien Credit Facility, the “New First Lien Credit Documents,”
each of which shall be in form and substance reasonably acceptable
to the New First Lien Agent and the Requisite New First Lien
Lenders (each as defined herein)) to be entered into with the Loan
Parties (as defined herein). The New First Lien Credit Facility
will be subject to (a) the approval of the Bankruptcy Court and (b)
emergence by the Loan Parties from the Chapter 11 Cases (the date
of such emergence, the “Plan
Effective Date” or the “Closing Date”), in accordance with
(i) the chapter 11 plan of reorganization (the “Plan”), (ii) any order entered by
the Bankruptcy Court authorizing the Loan Parties to enter into the
New First Lien Credit Facility, which order may be part of the
order confirming the Plan, each of which shall be in form and
substance reasonably acceptable to the New First Lien Agent and the
Requisite New First Lien Lenders, and (iii) the New First Lien
Credit Documents to be executed by the Loan Parties, the New First
Lien Agent and the New First Lien Lenders (as defined
below).
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Borrower:
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Reorganized
FCI (the “Borrower” or the
“Company”).
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Guarantors:
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All of
the obligations of the Borrower under the New First Lien Credit
Agreement shall be guaranteed by each of the Reorganized Debtors
and each of their non-Debtor subsidiaries (subject, in the case of
non-domestic subsidiaries, to limitations as required by legal
requirements or fiduciary duties under applicable local law)
(collectively, the “Guarantors”; and Guarantors,
together with the Borrower, the “Loan Parties”).
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Administrative Agent:
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An
entity to be selected by the Requisite First Lien Lenders, with the
consent of the Borrower (not to be unreasonably withheld or
delayed), shall act as administrative agent and collateral agent
for the New First Lien Credit Facility (in such capacities, the
“New First Lien
Agent”) on behalf of the New First Lien
Lenders.
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Lenders:
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The
Prepetition First Lien Lenders (collectively, the
“New First Lien
Lenders”).
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Amount & Type:
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A
junior secured term loan credit facility in an aggregate principal
amount of (i) $350.0 million (subject to reduction to be reasonably
agreed if the Canadian subsidiaries of the Borrower are sold prior
to the Plan Effective Date) minus (ii) the aggregate amount of the
loans and commitments under the New Exit Credit Agreement on the
Plan Effective Date, which is currently anticipated to be $125.0
million (the loans made thereunder, the “New First Lien Term
Loans”).
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Maturity Date:
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The
date that is 4 years after the Closing Date.
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Fees and Interest Rate:
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Interest
shall be paid in cash at the LIBOR Rate plus the Margin.
“Margin” means
8.00% per annum. The term “LIBOR Rate” will have a meaning
customary for financings of this type (and in no event shall be
less than 1.00%), and the basis for calculating accrued interest
and the interest periods for loans bearing interest at the LIBOR
Rate will be customary for financings of this type.
During
the continuance of a payment event of default, any overdue amount
under the New First Lien Credit Documents, and during the
continuance of a bankruptcy event of default, the New First Lien
Term Loans and all other outstanding obligations will bear interest
at an additional 2.00% per annum above the otherwise applicable
interest rate. To the extent permitted under the New Exit Credit
Agreement, interest will be payable in cash and otherwise such
interest will be payable “in
kind”.
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Amortization:
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If and
to the extent permitted under the New Exit Credit Agreement, the
New First Lien Term Loans will amortize in equal quarterly
installments (commencing with the fiscal quarter during which the
Closing Date occurs), in aggregate amounts equal to (i) during the
first two years after the Closing Date, 0.5% of the original
principal amount of the New First Lien Term Loans and (ii)
thereafter, 1.25% of the original principal amount of the New First
Lien Term Loans.
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Collateral:
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The New
First Lien Term Loans will be secured by a senior priority
perfected security interest (junior to the liens securing the New
Exit Credit Agreement) in substantially all present and after
acquired property (whether tangible, intangible, real, personal or
mixed) of the Loan Parties, wherever located, including, without
limitation, all accounts, inventory, equipment, capital stock in
subsidiaries of the Loan Parties, investment property, instruments,
chattel paper, real estate, leasehold interests, contracts,
patents, copyrights, trademarks and other general intangibles, and
all products and proceeds thereof, subject to certain exceptions
and materiality thresholds reasonably acceptable to the Requisite
New First Lien Lenders (collectively, the “Collateral”).
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Representations and Warranties:
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Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders and subject to the requirements of
the New Exit Credit Agreement.
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Mandatory Prepayments:
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Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders.
Mandatory
prepayments will, in any event, be required from 75% of Excess Cash
Flow (to be defined), with step downs to 50% if the Leverage Ratio
(to be defined as the ratio of total funded indebtedness, including
capital leases, to EBITDA) is below 3.00:1.00 and 0% if the
Leverage Ratio is below 2.00:1.00.
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Voluntary Prepayments:
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All
voluntary prepayments (regardless of whether before or after the
occurrence of an event of default, an acceleration of the New First
Lien Term Loans or the commencement of any bankruptcy or insolvency
proceeding) of the New First Lien Term Loans shall be subject to a
prepayment premium in an amount equal to (a) 103.0% of the New
First Lien Term Loans if such prepayment is made on or prior to the
first anniversary of the Closing Date, and (b) 102.0% of the New
First Lien Term Loans if such prepayment is made after the first
anniversary of the Closing Date but prior to the second anniversary
of the Closing Date (the premium referred to in clauses (a) and (b)
above, the “New First Lien
Prepayment Premium”).
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Affirmative Covenants:
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Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders.
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Reporting Requirements:
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Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders and to be initially based on the
reporting requirements in the Prepetition Super Senior Secured
Credit Agreement, but (i) to include a customary covenant to
deliver annual audited financial statements within 90 days after
the end of each fiscal year, (ii) to include a requirement to
deliver a budget within 90 days after the end of each fiscal year
to be built on a monthly basis and to include a balance sheet,
income statement and cash flow statement and KPIs, (iii) not to
include clauses (o) (updated budget), (p) (variance reports), (q)
(telecommunications supplier report) and (s) (Lingo report) of
Section 5.1 of the Prepetition Super Senior Secured Credit
Agreement, and (iv) to provide that the requirement to deliver
unaudited monthly financials and associated monthly KPIs will no
longer apply if the Leverage Ratio (calculated on a four-quarter
basis) for two consecutive fiscal quarters is less than
2.50:1.00.
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Negative Covenants:
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Customary
for facilities of this type with exceptions and baskets reasonably
acceptable to the Requisite New First Lien Lenders.
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Financial Covenants:
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Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders, but in any event to include a
minimum EBITDA covenant, a maximum capital expenditures covenant
and a maximum Leverage Ratio covenant, in each case with a 20%
cushion to the then approved forecast.
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Voting
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Amendments
and waivers of the New First Lien Credit Agreement will require the
approval of at least two (2) New First Lien Lenders (New First Lien
Lenders affiliated with each other or under common management being
deemed to be one single New First Lien Lender), collectively
holding more than 50% in the aggregate of the amount of the New
First Lien Term Loans (the “Requisite New First Lien
Lenders”); provided that, notwithstanding the
foregoing, the vote of each affected New First Lien Lender shall be
required for, among other things, (i) reductions of interest (or
the rate thereon or any increase in the allowed amount of, or
acceleration in the allowed or prescribed date with respect to,
interest payable in kind) or principal or fees or any postponement
of any date for payment for any of the foregoing, (ii) extension of
the maturity date, (iii) changes to the payment waterfall, (iv)
changes to certain pro rata sharing provisions, (v) releases of all
or substantially all of the value of the guarantees of the
Guarantors or a release of all or substantially all of the
Collateral and (vi) changes in the voting provisions, the
definition of required lenders (or similar terms) or voting
percentages specified in the definition of required lenders or
related terms.
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Events of Default:
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Substantially
consistent with the New Exit Credit Agreement with such changes as
may be mutually agreed.
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Conditions Precedent to Closing Date:
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Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders.
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Fees and Expenses Indemnification:
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The
facilities documentation will include expense reimbursement,
indemnification and other provisions as are usual and customary for
facilities of this kind and in the case of expense reimbursement
and indemnification provisions, reimbursement for the costs, fees
and expenses of the advisors to the New First Lien
Lenders.
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Governing Law and Submission to Jurisdiction:
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New
York
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Counsel to the New FirstLien Lenders:
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Davis
Polk & Wardwell LLP.
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Exhibit A-2
Redline of New First Lien Facility Term Sheet
NEW FIRST LIEN CREDIT AGREEMENT
SUMMARY OF TERMS
This
term sheet (the “New First Lien Term Loan
Term Sheet”) is Schedule 2 to the Restructuring
Support Agreement Term Sheet (the “Term Sheet”).
Capitalized terms used but not defined herein have the meanings
given to them in the Term Sheet attached to the Restructuring
Support Agreement as Exhibit B and the Restructuring Support
Agreement, as applicable.
This
New First Lien Term Loan Term Sheet sets forth the principal terms
of a potential takeback first lien term loan facility (the
“New
First Lien Credit Facility”; the credit agreement
evidencing the New First Lien Credit Facility, the
“New
First Lien Credit Agreement” and, together with the
other definitive documents governing the New First Lien Credit
Facility, the “New First Lien Credit
Documents,” each of which shall be in form and
substance reasonably acceptable to the New First Lien Agent and the
Requisite New First Lien Lenders (each as defined herein)) to be
entered into with the Loan Parties (as defined herein). The New
First Lien Credit Facility will be subject to (a) the approval of
the Bankruptcy Court and (b) emergence by the Loan Parties from the
Chapter 11 Cases (the date of such emergence, the
“Plan
Effective Date” or the “Closing
Date”), in accordance with (i) the chapter 11 plan of
reorganization (the “Plan”), (ii)
any order entered by the Bankruptcy Court authorizing the Loan
Parties to enter into the New First Lien Credit Facility, which
order may be part of the order confirming the Plan, each of which
shall be in form and substance reasonably acceptable to the New
First Lien Agent and the Requisite New First Lien Lenders, and
(iii) the New First Lien Credit Documents to be executed by the
Loan Parties, the New First Lien Agent and the New First Lien
Lenders (as defined below).
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Borrower:
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Reorganized
FCI (the “Borrower” or
the “Company”).
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Guarantors:
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All of
the obligations of the Borrower under the New First Lien Credit
Agreement shall be guaranteed by each of the Reorganized Debtors
and each of their non-Debtor subsidiaries (subject, in the case of
non-domestic subsidiaries, to limitations as required by legal
requirements or fiduciary duties under applicable local law)
(collectively, the “Guarantors”; and Guarantors,
together with the Borrower, the “Loan Parties”).
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Administrative Agent:
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An
entity to be selected by the Requisite First Lien Lenders, with the
consent of the Borrower (not to be unreasonably withheld or
delayed), shall act as administrative agent and collateral agent
for the New First Lien Credit Facility (in such capacities, the
“New
First Lien Agent”) on behalf of the New First Lien
Lenders.
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Lenders:
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The
Prepetition First Lien Lenders (collectively, the
“New
First Lien Lenders”).
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Amount & Type:
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A
junior secured term loan credit facility in an aggregate principal
amount of (i) $350.0 million (subject to reduction to be reasonably
agreed if the Canadian subsidiaries of the Borrower are sold prior
to the Plan Effective Date) minus (ii) the aggregate amount of the
loans and commitments under the New Exit Credit Agreement on the
Plan Effective Date, which is currently anticipated to be $125.0
million (the loans made thereunder, the “New First Lien Term
Loans”).
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Maturity Date:
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The
date that is 4 years after the Closing Date.
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Fees and Interest Rate:
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Interest
shall be paid in cash at the LIBOR Rate plus the Margin.
“Margin” means 8.00% per annum. The term “LIBOR
Rate” will have a meaning customary for financings of this
type (and in no event shall be less than 1.00%), and the basis for
calculating accrued interest and the interest periods for loans
bearing interest at the LIBOR Rate will be customary for financings
of this type.
During
the continuance of a payment event of default, any overdue amount
under the New First Lien Credit Documents, and during the
continuance of a bankruptcy event of default, the New First Lien
Term Loans and all other outstanding obligations will bear interest
at an additional 2.00% per annum above the otherwise applicable
interest rate. To the extent permitted under the New
Exit Credit Agreement, interest will be payable in cash and
otherwise such interest will be payable “in
kind”.
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Amortization:
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If and to Tthe extent permitted under the New Exit
Credit Agreement, the New First Lien Term Loans will
amortize in equal quarterly installments (commencing with the
fiscal quarter during which the Closing Date occurs), in aggregate
amounts equal to (i) during the first two years after the Closing
Date, 0.5% of the original principal amount of the New First Lien
Term Loans and (ii) thereafter, 1.25% of the original principal
amount of the New First Lien Term Loans.
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Collateral:
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The New
First Lien Term Loans will be secured by a senior priority
perfected security interest (junior to the liens securing the New
Exit Credit Agreement) in substantially all present and after
acquired property (whether tangible, intangible, real, personal or
mixed) of the Loan Parties, wherever located, including, without
limitation, all accounts, inventory, equipment, capital stock in
subsidiaries of the Loan Parties, investment property, instruments,
chattel paper, real estate, leasehold interests, contracts,
patents, copyrights, trademarks and other general intangibles, and
all products and proceeds thereof, subject to certain exceptions
and materiality thresholds reasonably acceptable to the Requisite
New First Lien Lenders (collectively, the “Collateral”).
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Representations and Warranties:
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Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders and subject to the requirements of the
New Exit Credit Agreement.
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Mandatory Prepayments:
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Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders.
Mandatory
prepayments will, in any event, be required from 75% of Excess Cash
Flow (to be defined), with step downs to 50% if the Leverage Ratio
(to be defined as the ratio of total funded indebtedness, including
capital leases, to EBITDA) is below 3.00:1.00 and 0% if the
Leverage Ratio is below 2.00:1.00.
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Voluntary Prepayments:
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All
voluntary prepayments (regardless of whether before or after the
occurrence of an event of default, an acceleration of the New First
Lien Term Loans or the commencement of any bankruptcy or insolvency
proceeding) of the New First Lien Term Loans shall be subject to a
prepayment premium in an amount equal to (a) 103.0% of the New
First Lien Term Loans if such prepayment is made on or prior to the
first anniversary of the Closing Date, and (b) 102.0% of the New
First Lien Term Loans if such prepayment is made after the first
anniversary of the Closing Date but prior to the second anniversary
of the Closing Date (the premium referred to in clauses (a) and (b)
above, the “New First Lien Prepayment
Premium”).
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Affirmative Covenants:
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Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders.
|
|
Reporting Requirements:
|
Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders and to be initially based on the
reporting requirements in the Prepetition Super Senior Secured
Credit Agreement, but (i) to include a customary covenant to
deliver annual audited financial statements within 90 days after
the end of each fiscal year, (ii) to include a requirement to deliver a budget within 90 days
after the end of each fiscal year to be built on a monthly basis
and to include a balance sheet, income statement and cash flow
statement and KPIs, (iii) not to include clauses (o) (updated
budget), (p) (variance reports), (q) (telecommunications supplier
report) and (s) (Lingo report) of Section 5.1 of the
Prepetition Super Senior Secured Credit Agreement, and (iv) to provide that the requirement to
deliver unaudited monthly financials and associated monthly KPIs
will no longer apply if the Leverage Ratio (calculated on a
four-quarter basis) for two consecutive fiscal quarters is less
than 2.50:1.00.
|
|
Negative Covenants:
|
Customary
for facilities of this type with exceptions and baskets reasonably
acceptable to the Requisite New First Lien Lenders.
|
|
Financial Covenants:
|
Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders, but in any event to include a
minimum EBITDA covenant, a maximum capital expenditures covenant
and a maximum Leverage Ratio covenant, in each case with a 20%
cushion to the then approved forecast.
|
|
Voting
|
Amendments
and waivers of the New First Lien Credit Agreement will require the
approval of at least two (2) New First Lien Lenders (New First Lien
Lenders affiliated with each other or under common management being
deemed to be one single New First Lien Lender), collectively
holding more than 50% in the aggregate of the amount of the New
First Lien Term Loans (the “Requisite New First Lien
Lenders”); provided that, notwithstanding the
foregoing, the vote of each affected New First Lien Lender shall be
required for, among other things, (i) reductions of interest (or
the rate thereon or any increase in the allowed amount of, or
acceleration in the allowed or prescribed date with respect to,
interest payable in kind) or principal or fees or any postponement
of any date for payment for any of the foregoing, (ii) extension of
the maturity date, (iii) changes to the payment waterfall, (iv)
changes to certain pro rata sharing provisions, (v) releases of all
or substantially all of the value of the guarantees of the
Guarantors or a release of all or substantially all of the
Collateral and (vi) changes in the voting provisions, the
definition of required lenders (or similar terms) or voting
percentages specified in the definition of required lenders or
related terms.
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Events of Default:
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Substantially
consistent with the New Exit Credit Agreement with such changes as
may be mutually agreed.
|
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Conditions Precedent to Closing Date:
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Customary
for facilities of this type and reasonably acceptable to the
Requisite New First Lien Lenders.
|
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Fees and Expenses Indemnification:
|
The
facilities documentation will include expense reimbursement,
indemnification and other provisions as are usual and customary for
facilities of this kind and in the case of expense reimbursement
and indemnification provisions, reimbursement for the costs, fees
and expenses of the advisors to the New First Lien
Lenders.
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Governing Law and Submission to Jurisdiction:
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New
York.
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Counsel to the New First Lien Lenders:
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Davis
Polk & Wardwell LLP.
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Exhibit B
New Exit Facility Term Sheet
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TSL Advisers, LLC
301 Commerce Street, Suite 3300
Fort Worth, Texas 76102
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MSD Partners, L.P.
645 Fifth Ave, 21st Floor
New York, New York 10022 5910
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PRIVATE AND CONFIDENTIAL
October
15, 2019
Mr.
Keith Soldan
Chief
Financial Officer
Fusion
Connect, Inc.
420
Lexington Avenue, Suite 300
New
York, New York 10170
Proposal Letter
Dear
Mr. Soldan:
Each of
TSL Advisers, LLC, on behalf of TPG Specialty Lending, Inc. or one
of its subsidiaries (“TSL”), and MSD Partners, L.P. or
one of its affiliates (“MSD” and together with TSL, the
“Lenders”), is
pleased to confirm in this letter (“Proposal Letter”) its interest in
working on a potential financing for Fusion Connect, Inc. (the
“Company”).
Based upon our discussions with the Company to date, the Lenders
expect that the material terms of the exit credit facilities
(collectively, the “Exit
Credit Facilities”) would be as set forth in the term
sheet attached hereto as Annex B (the “Term Sheet”; capitalized terms
used but not defined herein shall have the meanings given to them
in the Term Sheet), which Annex B is incorporated by reference into
this Proposal Letter. This Proposal Letter is an expression of
interest only, to be used solely as a basis for continued
discussions, and does not constitute a commitment of the Lenders to
provide the financing described herein (the “Exit Financing Commitment”) (or
any obligation on the part of the Lenders to continue discussing
such financing, to conduct any due diligence with respect to such
financing or to initiate an internal credit approval proceeding for
such financing) or an agreement to deliver such Exit Financing
Commitment. Without limiting the generality of the foregoing, it is
understood and agreed that, prior to delivering any such Exit
Financing Commitment, the Lenders would be required to obtain an
internal credit approval for the Exit Credit
Facilities.
The
terms of this Proposal Letter and the Term Sheet are intended as an
outline of certain of the material terms of the proposed Exit
Credit Facilities based on discussions with the Company to date,
but do not include all of the terms, conditions, covenants,
representations, warranties, default clauses, and other provisions
that would be contained in any definitive credit documents for such
transactions.
In
consideration of the Lenders undertaking to work towards providing
the Exit Financing Commitment, the Company agrees to pay to TSL,
upon approval by the United States Bankruptcy Court for the
Southern District of New York (the “Bankruptcy Court”), an expense
deposit of $200,000 (the “Initial Expense Deposit”), which
Initial Expense Deposit will be used to pay the Lenders’
expenses incurred in connection with the Exit Credit Facilities,
including the potential preparation of (a) the definitive
documentation therefor and the other transactions contemplated
hereby and (b) a commitment letter for the Exit Financing
Commitment (the “Commitment
Letter”) (including, without limitation, the
reasonable and documented fees, disbursements and other charges of
(y) one outside counsel to the Lenders, taken as a whole, in
respect of the Exit Credit Facilities and (z) one additional
outside counsel for MSD in respect of the drafting and negotiation
of any inter-lender agreements and related matters, and examiners,
search fees, due diligence expenses, transportation expenses, and
appraisal, environmental, audit, and consultant costs and expenses)
(collectively, the “Lender
Expenses”), through the effective date of the
Commitment Letter. The Lenders may reasonably request an additional
expense deposit in an amount to be agreed by the parties if the
amount of the Lender Expenses incurred or expected to be incurred
by the Lenders exceeds or are expected to exceed the amount of the
Initial Expense Deposit (the “Additional Expense Deposit”,
together with the Initial Expense Deposit, the “Expense Deposit”). The Company
shall pay the Additional Expense Deposit within two business days
after the date of the approval of a motion authorizing such
Additional Expense Deposit by the Bankruptcy Court. TSL shall
promptly notify the Company once (i) the balance of the Expense
Deposit is less than $50,000 or (ii) the Lender Expenses are
expected to exceed the amount of the Initial Expense Deposit. The
Expense Deposit will not be segregated and may be commingled with
other funds, and the Company will not be entitled to receive
interest on the Expense Deposit. Except as set forth below, if for
any reason neither the Lenders nor any of their affiliates issue
the Exit Financing Commitment to the Company, TSL shall return the
Expense Deposit to the Company net of Lender Expenses. If the
Lenders or their affiliates (A) cannot issue the Exit Financing
Commitment to the Company as a result of any action or inaction of
the Company or (B) commit to provide the Exit Credit Facilities in
accordance with the terms hereof and the Term Sheet and the Company
declines to accept the Exit Financing Commitment in accordance with
its terms, TSL shall retain the unused balance of the Expense
Deposit, if any. If the Lenders issue the Exit Financing Commitment
to the Company, (1) the Expense Deposit net of any unpaid Lender
Expenses shall be credited against any closing, upfront or any
similar fees payable to the Lenders thereunder and (2) the Company
shall be obligated to reimburse the Lenders for, and, to the extent
mutually agreed by the Lenders and the Company and approved by the
Bankruptcy Court, provide an additional expense deposit in respect
of, all Lender Expenses incurred after the effective date of the
Commitment Letter through the effective date of the Exit Credit
Facilities.
In
further consideration of this proposal by the Lenders and
recognizing that in connection herewith the Lenders and their
affiliates are incurring substantial Lender Expenses, the Company
hereby agrees to pay all such Lender Expenses (whether incurred
before or after the date hereof), regardless of whether any of the
transactions contemplated hereby are consummated; provided,
however, that the Lenders shall be reimbursed for such Lender
Expenses from the Expense Deposit as such Lender Expenses are
incurred and that the Company shall not have any obligations to
reimburse any Lender Expenses in excess of the Initial Expense
Deposit unless either (a) the Company and the Lenders mutually
agree on the amount of the Additional Expense Deposit as set forth
in the preceding paragraph of this Proposal Letter and the Company
receives Bankruptcy Court approval to pay the Additional Expense
Deposit or (b) the Lenders provide the Exit Financing Commitment.
The Company also hereby agrees to pay all costs and expenses of the
Lenders (including, without limitation, reasonable fees and
disbursements of counsel) incurred in connection with the
enforcement of any of its rights and remedies hereunder. The
Company’s expense reimbursement obligations hereunder shall
be superseded by the expense reimbursement obligations under the
Commitment Letter.
By
executing this Proposal Letter, the Company agrees that from the
date hereof until the date which is 30 days after the date hereof,
(i) the Company will not solicit from any financing provider,
person or persons other than the Lenders a proposal or commitment
to provide debt or equity financing in lieu of the Exit Credit
Facilities and (ii) neither it nor any of its affiliates will enter
into any definitive agreement for a debt or equity financing
(including any modification, extension, or continuation of existing
credit facilities) in lieu of the Exit Credit Facilities if the
Lenders are prepared to provide the proceeds of the Exit Credit
Facilities on the terms and conditions substantially as set forth
in this Proposal Letter; provided that if the board of directors of
the Company determines in good faith, and after consultation with
outside counsel, that the Exit Credit Facilities are not in the
best interests of the Company and continued support for the Exit
Credit Facilities would be inconsistent with the exercise of its
fiduciary duties under applicable law, the Company may terminate
the Proposal Letter upon three business days’ prior notice to
the Lenders.
If
after the date hereof, the Company or any of its affiliates
receives from other potential financing providers, person or
persons, an offer, solicitation or other communication with respect
to a proposal or commitment to provide debt or equity financing in
lieu of the Exit Credit Facilities, the Company shall within three
business days of receipt of such proposal or commitment provide
written notice to the Lenders thereof, attaching therewith any
documentation received with respect to any such proposal or
commitment.
In
connection with this Proposal Letter and Term Sheet, it is the
Lenders’ policy to receive indemnification. The Company
agrees to the provisions with respect to our indemnity and other
matters set forth in Annex A
attached hereto, which Annex A is incorporated by reference into
this Proposal Letter.
Please
note that this Proposal Letter, the Term Sheet and any written or
oral advice or communication provided by the Lenders in connection
with this Proposal Letter, the Term Sheet, or the proposed Exit
Credit Facilities contemplated hereby is exclusively for the
information of the Board of Directors and senior management of the
Company and may not be disclosed to any third party (other than to
the Company’s attorneys and other professional advisors) or
circulated or referred to publicly without the Lenders’ prior
written consent, except as may be required by law.
In
addition, please note that the Lenders and their affiliates do not
provide accounting, tax or legal advice. Notwithstanding anything
herein to the contrary, the Lenders (and each of their respective
partners, officers, directors, employees, affiliates) may disclose
to its agents, advisors and attorneys, to the extent the Lenders
determine is reasonably necessary to consummate the transaction
contemplated herein, the tax treatment and tax structure of this
potential transaction and all materials related thereto (including
tax opinions or other tax analyses) that are provided to the
Lenders relating to such tax treatment and tax structure. However,
the foregoing sentence shall not apply to any information relating
to the tax treatment or tax structure to the extent reasonably
necessary to enable any person to comply with applicable securities
laws. For this purpose, “tax
treatment” means U.S. federal income tax treatment,
and “tax structure” is limited to any facts relevant to
the U.S. federal income tax treatment of the potential
transaction.
The
Lenders hereby notify the Company that the Lenders may be required
to obtain, verify and record information that identifies the
Company, which information includes the Company’s name and
address and other information that will allow the Lenders to
identify the Company in accordance with applicable
law.
As you
know, the Lenders and/or their respective affiliates may from time
to time effect transactions, for their own account or the account
of customers, and hold positions in loans or options on loans of
the Company and other companies that may be the subject of this
Proposal Letter or Term Sheet. In addition, the Lenders and/or
their respective affiliates may from time to time effect
transactions and hold positions in securities or options on
securities of the Company and other companies that may be the
subject of this Proposal Letter or Term Sheet. In addition, to the
extent the Lenders determine it is reasonably necessary to
consummate the transaction contemplated herein, the Lenders may
employ the services of its affiliates in providing certain services
hereunder and may exchange with such affiliates information
concerning the company and other companies that may be the subject
of this Proposal Letter or Term Sheet, and such affiliates shall be
entitled to the benefits afforded to the Lenders
hereunder.
Neither
this Proposal Letter nor the Term Sheet may be amended or waived
except by an instrument in writing signed by the Lenders and the
Company. This Proposal Letter may be executed in any number of
counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Delivery of an executed
signature page of this Proposal Letter by facsimile transmission or
email shall be effective as delivery of a manually executed
counterpart thereof.
Please
confirm that the foregoing is in accordance with your understanding
by signing and returning to the Lenders the enclosed copy of this
Proposal Letter on or before 5:00 pm New York time on October 15,
2019, whereupon this Proposal Letter shall become binding, subject
to the receipt by TSL of the Initial Expense Deposit as set forth
below. If not signed and returned as described in the preceding
sentence by such date, this proposal will expire on such date. The
Company shall transfer the Initial Expense Deposit by wiring the
amount thereof to State Street, ABA #011-000-028, A/C Name: TPG
Specialty Lending, Inc., A/C # 10207850, Ref: Fusion Connect, Inc.
Exit Credit Facilities within two business days after the date of
the approval of the motion authorizing such Initial Expense Deposit
by the Bankruptcy Court; provided, that this Proposal
Letter shall terminate if such approval is not obtained and the
Initial Expense Deposit is not received by TSL on or before October
31, 2019.
This
Proposal Letter (i) supersedes all prior discussions, agreements,
commitments, arrangements, negotiations and understandings, whether
oral or written, of the parties with respect thereto, (ii) shall be
governed by and construed in accordance with the laws of the State
of New York without regard to principles of conflicts of laws,
(iii) may not be assigned by either party without the other
party’s prior written consent and any purported assignment
without such consent shall be null and void, (iii) shall be binding
upon the parties and their respective successors and assigns, and
(iv) may not be relied upon or enforced by any other person or
entity and is not intended to confer any benefit upon, or create
any right in favor of, any person other than the parties hereto.
Any right to trial by jury with respect to any action or proceeding
arising in connection with or as a result of either this
arrangement or any matter referred to in the Proposal Letter is
hereby waived by the parties hereto. The Company agrees that any
suit or proceeding arising in respect to this arrangement or any
matter referred to in the Proposal Letter will be tried exclusively
in the U.S. District Court for the Southern District of New York
or, if that court does not have subject matter jurisdiction, in any
state court located in the City of New York and the Company agrees
to submit to the jurisdiction of, and to venue in, such
courts.
Annex A
In the event that a Lender becomes involved in any capacity in any
action, proceeding or investigation brought by or against any
person, including stockholders of the Company, in connection with
or as a result of either this arrangement or any matter referred to
in the letter to which this Annex A is attached or the Term Sheet
related thereto (collectively, the “Proposal Letter”),
the Company periodically will reimburse such Lender for its
reasonable and documented legal and other expenses (including the
cost of any investigation and preparation) incurred in connection
therewith provided,
that if both Lenders are involved in any such action proceeding or
investigation, the Company’s reimbursement obligation with
respect to legal expenses will be limited to the reasonable and
documented fees, disbursements and other charges of one primary
counsel to the Lenders, taken as a whole; provided further, that in
the case of any actual or reasonably perceived conflict of
interest, each Lender shall be entitled to be reimbursed for its
reasonable and documented legal fees, disbursements and other
charges for one counsel. The Company also will indemnify and hold
each Lender harmless against any and all losses, claims, damages or
liabilities to any such person in connection with or as a result of
either this arrangement or any matter referred to in the Proposal
Letter, and without regard to the exclusive or contributory
negligence of such Lender or its affiliates, or the partners,
directors, agents, employees and controlling persons (if any), as
the case may be, of such Lender and any such affiliate, except to
the extent that such have been found by a final, non-appealable
judgment of a court that any such loss, claim, damage or liability
results from the gross negligence, willful misconduct or bad faith
of such Lender in performing the services that are the subject of
the Proposal Letter. If for any reason the foregoing
indemnification is unavailable to a Lender or is insufficient to
hold it harmless, then the Company shall contribute to the amount
paid or payable by such Lender as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect
the relative economic interests of the Company and its stockholders
on the one hand and such Lender on the other hand in the matters
contemplated by the Proposal Letter as well as the relative fault
of the Company and such Lender with respect to such loss, claim,
damage or liability and any other relevant equitable
considerations. The reimbursement, indemnity and contribution
obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any affiliate of
each Lender and the partners, directors, agents, employees and
controlling persons (if any), as the case may be, of each Lender
and any such affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal
representatives of the Company, each Lender, any such affiliate and
any such person. The Company also agrees that neither any
indemnified party nor any of such affiliates, partners, directors,
agents, employees or controlling persons shall have any liability
based on its or their exclusive or contributory negligence or
otherwise to the Company or any person asserting claims on behalf
of or in right of the Company or any other person in connection
with or as a result of either this arrangement or any matter
referred to in the Proposal Letter except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the
Company have been found by a final, non-appealable judgment of a
court to have resulted from the gross negligence, willful
misconduct or bad faith of such indemnified party in performing the
services that are the subject of the Proposal Letter; provided,
however, that in no event shall such indemnified party or such
other parties have any liability for any indirect, consequential or
punitive damages in connection with or as a result of such
indemnified party’s or such other parties’ activities
related to the Proposal Letter. The provisions of this Annex A
shall survive any termination or completion of the arrangement
provided by the Proposal Letter; provided, however, that, to the extent
the Commitment Letter is executed and delivered to the Company such
provisions shall be superseded by the corresponding provisions set
forth in the Commitment Letter.
Annex B
INDICATIVE TERM SHEET
DATED
OCTOBER 15, 2019
FOR
DISCUSSION PURPOSES ONLY
SENIOR
SECURED EXIT CREDIT FACILITIES
|
Company:
|
Fusion
Connect, Inc., as reorganized pursuant to the Chapter 11 bankruptcy
proceedings (the “Company”).
|
|
Guarantors:
|
Each of
the existing and future direct, indirect and
wholly-owned1 subsidiaries of the
Company and each of the existing and future direct and indirect
parent companies of the Company (the “Guarantors”); provided, however,
that ability to guarantee and grant a security interest in their
assets by foreign subsidiaries of the Company is subject to further
diligence.
|
|
Sole Lead Arranger and Administrative Agent:
|
TPG
SPECIALTY LENDING, INC. (“TSL”) (in such capacity, the
“Agent” or the
“Arranger,” as
applicable).
|
|
Lenders:
|
TSL (or
an affiliate of TSL to be identified), MSD (or an affiliate of MSD
to be identified) and/or other financial institutions or investment
vehicles selected by TSL and MSD (collectively, the
“Lenders”).
|
|
Exit Credit Facilities:
|
$20,000,000 Exit
Revolving Facility
$100,000,000 Exit
Term Loan
$120,000,000 Total
(“Total Facility Amount”)
|
|
|
TSL and
MSD shall each provide 50% of the advances to be made under the
Exit Revolving Facility and the Exit Term Loan; provided, that TSL
and MSD reserve the right to, subject to the Company’s
consent, jointly syndicate the right to provide up to $25,000,000
of the Exit Term Loan.
|
|
Use of Proceeds:
|
The
proceeds of the Exit Term Loan shall be applied (i) to refinance
the DIP Facilities, (ii) to pay transaction fees and expenses,
(iii) to pay vendor payments and other Chapter 11 exit costs, and
(iv) for working capital and other general corporate
purposes.
|
|
Initial Funding Date:
|
November
30, 2019, or such other date as all conditions to the initial
funding of the Exit Credit Facilities (including without limitation
the confirmation of the Company’s Chapter 11 plan of
reorganization and the effectiveness thereof) have been
satisfied.
|
|
Maturity Date:
|
The
date that is 5 years after the Initial Funding Date (the
“Maturity
Date”).
|
|
Interest Rates:
|
A
floating rate of LIBOR + 5.75% with a 1.50% LIBOR floor, payable up
to quarterly for LIBOR borrowings. All rates shall be calculated on
a 360-day basis.
|
|
Facility Fee:
|
2.00%
of the Total Facility Amount, payable to the Arranger on the
Initial Funding Date for the ratable benefit of the
Lenders.
|
|
Administration Fee:
|
$75,000
per annum, payable to the Agent annually in advance on the Initial
Funding Date and on each anniversary thereof.
|
_______________________
|
Un-drawn Facility Fee:
|
0.50%
per annum times the daily average aggregate un-drawn portion of the
Exit Revolving Facility shall accrue from the Initial Funding Date
and shall be payable monthly in arrears to the Agent for the
ratable benefit of the Lenders under the Exit Revolving
Facility.
|
|
Amortization:
|
Exit
Revolving Facility: None.
|
|
|
Exit
Term Loan: Amortization of principal in equal quarterly
installments in an amount equal to 10.00% per annum of the initial
funded balance of the Exit Term Loan, with the outstanding amount
due and payable on the Maturity Date.
|
|
Mandatory Prepayments:
|
Mandatory
prepayments (subject to customary exceptions and baskets) from
equity issuances, debt issuances, excess cash flow
(“ECF”)2, asset sales, tax
refunds and other extraordinary receipts, and
insurance/condemnation proceeds.
|
|
Prepayment Premium:
|
The
Exit Credit Facilities shall be subject to the following
prepayment/commitment reduction premium: 3.00% in months
0–12, 2.00% in months 13–24, 1.00% in months 25–
36, and nothing thereafter. The Prepayment Premium shall not be
applicable to payments of Amortization or Mandatory Prepayments
from ECF.
|
|
Collateral:
|
First
lien on substantially all tangible and intangible assets and equity
interests of the Company and each of the Guarantors, subject to
customary permitted liens and subject to certain customary
exceptions and materiality thresholds to be mutually
agreed3
and excluding the Vector Subordinated Note Collateral (as defined
in the Company’s Final DIP Order (Docket No. 160), entered by
the Bankruptcy Court on July 3, 2019).
|
|
Financial Covenants:
|
There
would be financial covenants as mutually agreed, customary and
appropriate for a loan facility of this nature. Financial covenants
would include minimum fixed charge coverage, maximum debt/EBITDA,
and maximum capital expenditures, in each case set at levels to be
agreed by the parties.
|
|
Additional Indebtedness At Close:
|
Up to
$275,000,000 second lien take-back term loan (the
“Take-Back Term
Loan”), with an interest rate not to exceed L+8.00%
per annum (of which no more than $13,750,000 may be paid in cash
and the remainder paid in kind). While obligations under the Exit
Credit Facilities are outstanding, the Take-Back Term Loan shall
not, without limitation:
|
|
|
(i) receive
any amortization payments;
|
|
|
(ii) receive
any mandatory prepayments (from ECF or otherwise), unless declined
by the Lenders under the Exit Credit Facilities;
|
|
|
(iii) have any
covenants that are different than or more restrictive than those
contained in the definitive documentation governing the Exit Credit
Facilities;
|
|
|
(iv) have any
events of default that are different than or more restrictive than
those contained in the definitive documentation governing the Exit
Credit Facilities;
|
|
|
(v) be pledged
any collateral or receive any guarantees, except to the extent
that, as applicable, such collateral has been pledged to or such
guarantees have been provided to the Lenders under the Exit Credit
Facilities, in each case on a priority basis.
|
|
|
The
Take-Back Term Loan shall have a maturity date that is 5.5 years
after the Initial Funding Date. Any optional prepayments of the
Take-Back Term Loan (including any fees or premiums associated
therewith) shall be subject to restricted payments conditions and
baskets to be agreed by the parties. The Take-Back Term Loan shall
be governed by an intercreditor agreement reasonably satisfactory
to Agent.
|
_____________________________
|
Affirmative Covenants:
|
Customary
and appropriate for facilities of this type, including without
limitation delivery of financial statements and other information,
maintenance of existence, payment of taxes and claims, maintenance
of properties and insurance, inspections, lender meetings,
compliance with laws, and compliance with contractual obligations,
and in each case subject to customary carve outs and thresholds to
be agreed.
|
|
Negative Covenants:
|
Customary
and appropriate for facilities of this type, including without
limitation limitations on indebtedness, liens, guarantees, negative
pledges, restricted payments, subsidiary distributions,
investments, fundamental changes, disposition of assets,
acquisitions, disposal of subsidiary interests, sale and
lease-backs, transactions with affiliates, conduct of business,
changes to material contracts, and deposit accounts, and in each
case subject to customary carve outs and thresholds to be
agreed.
|
|
Representations and Warranties, Events of Default, and
Indemnification:
|
Customary
and appropriate for facilities of this type.
|
|
Other Conditions and Requirements:
|
Usual
and customary for facilities of this type, including without
limitation:
|
|
|
● Satisfactory
completion and review of third-party accounting due diligence
report;
|
|
|
● Documents governing
the Exit Credit Facilities, satisfactory legal opinions, corporate
records, and documents from public officials and officers’
certificates shall have been delivered;
|
|
|
● Other satisfactory
due diligence, including but not limited to: business due
diligence, market due diligence, management background checks, and
legal review;
|
|
|
● Minimum LTM EBITDA
at closing of at least an amount to be mutually agreed, with
adjustments satisfactory to the Agent;
|
|
|
● Minimum LTM EBITDA
less capitalized expenditures at closing of at least an amount to
be mutually agreed, with adjustments satisfactory to the
Agent;
|
|
|
● After giving effect
to the borrowings under the Exit Credit Facilities on the Initial
Funding Date, the sum of Company’s unrestricted domestic cash
shall be at least an amount to be mutually agreed.
|
|
Choice of Law:
|
State
of New York.
|
This Indicative Term Sheet is intended for discussion purposes only
does not purport to summarize all the terms, conditions,
representations, warranties and other provisions with respect to
the transactions referred to herein. This Indicative Term Sheet
does not constitute an offer, agreement, or commitment by any
Lender or any of its affiliates to enter into any transaction. Any
such commitment (i) will be subject to completion of our credit
approval process, (ii) will be subject to the execution and
delivery of a definitive Commitment Letter reasonably acceptable to
all parties and their respective counsel, (iii) will be subject to
the completion of our legal and business due diligence and our
satisfaction with the results thereof, and (iv) will assume the
accuracy and completeness in all material respects of the
information provided by or on behalf of the Company. This
Indicative Term Sheet is confidential and may not be disclosed to
any person or entity other than the Company’s respective
officers, directors and professional advisors.
[Remainder
of Page Intentionally Blank]
Exhibit C
Special Warrant Agreement
SPECIAL WARRANT AGREEMENT
THIS
SPECIAL WARRANT AGREEMENT (this “Agreement”), dated as of
[●], 2019, is by and between FUSION CONNECT, INC., a Delaware
corporation (the “Company) and the Special Warrantholders
listed on Annex I
hereto each of which is the holder of certain Allowed Claims (as
defined in the Amended Plan) and their respective successors or
permitted assigns or transferees (collectively, the
“Holders”).
Fusion and the Holders are sometimes referred to as a
“Party” and
collectively as the “Parties”.
WHEREAS, on June 3, 2019, the Company
and each of its U.S. subsidiaries commenced voluntary cases under
chapter 11 of title 11 of the United States Code, 11 U.S.C.
§§ 101 et seq., in the United States Bankruptcy Court for
the Southern District of New York (the “Bankruptcy Court”), which cases
are being jointly managed under the caption In re Fusion Connect,
Inc., et al Case No. 19-18111 (SMB);
WHEREAS, the Company filed the
Second Amended Joint Chapter 11
Plan of Fusion Connect, Inc. and its Subsidiary Debtors,
dated as of October 7, 2019 [ECF No. 455] (as it may be further
amended, modified and supplemented from time to time, the
“Amended Plan”)
with the Bankruptcy Court;
WHEREAS, on [●], 2019, the
Bankruptcy Court entered an order confirming the Amended
Plan;
WHEREAS, in connection with the
consummation of the transactions contemplated by the Amended Plan,
the Parties wish to enter into this Agreement for the issuance of
special warrants to purchase shares of the Company’s common
stock, $0.01 par value per share, substantially in the form
attached as Exhibit A
(the “Special
Warrants”) and to reflect certain rights and
obligations with respect to the Company and the
Holders;
WHEREAS, the Special Warrants will be
issued in accordance with the Equity Allocation Mechanism (as
defined in the Amended Plan) pursuant to this
Agreement;
WHEREAS, the Company desires to provide
for the form and provisions of the Special Warrants, the terms upon
which they may be issued and exercised, and the respective rights,
limitation of rights, and immunities of the Company and each
Holder; and
WHEREAS, all acts and things have been
done and performed which are necessary to make the Special
Warrants, when issued, the valid, binding and legal obligations of
the Company, subject to the terms and conditions set forth herein,
and to authorize the execution and delivery of this
Agreement.
NOW, THEREFORE, in consideration of the
mutual agreements herein contained and for good and valuable
consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties agree as follows:
ARTICLE
1
DEFINITIONS
Section
1.01. Definition of Terms.
Capitalized terms used but not otherwise defined herein shall have
the respective meanings ascribed to them in the Amended Plan. As
used in this Agreement, the following capitalized terms shall have
the following respective meanings:
“Affiliate” has the meaning set
forth in Rule 12b-2 of the Exchange Act.
“Agreement” has the meaning set
forth in the preamble.
“Bankruptcy Court” has the meaning
set forth in the Recitals.
“Board of Directors” means the
board of directors of the Company.
“Business Day” means any day
excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the State of New York or is a day on which
banking institutions located in such state are authorized or
required by law or other governmental action to close.
“Common Stock” means the shares of
the Company’s common stock, par value $0.01 per share, and
shall include any successor security as a result of any
recapitalization, merger, business combination, sale of all or
substantially all of the Company’s assets, reorganization,
reclassification, or similar transaction involving the
Company.
“Communications Laws” means the
Communications Act of 1934, as amended, and the FCC Rules and,
where applicable, state statutes and State PUC
regulations.
“Company” has the meaning set forth
in the preamble.
“Convertible Securities” means any
securities that are directly or indirectly convertible into or
exchangeable for shares of Common Stock or other rights or options
to subscribe for or purchase shares of any securities of the
Company, including the Special Warrants.
“Declaratory Ruling” means a
declaratory ruling issued by the FCC in response to the
Company’s Petition for Declaratory Ruling.
“Exchange Act” means the Securities
Exchange Act of 1934, as amended.
“Exercise Date” means the date on
which a Holder exercises its Special Warrants, in whole or in part,
pursuant to and in accordance with the terms and conditions
described herein and in the Special Warrant.
“Exercise Form” means a properly
completed and duly executed exercise form for the election to
exercise a Special Warrant for Special Warrant Shares,
substantially in the form attached hereto as Exhibit
B.
“Expiration Date” means 5:00 p.m.
New York City time on [], 2039.
“Fair Market Value” of the Special
Warrant Shares on any date of determination means:
(a) if
the Common Stock is listed for trading on a national securities
exchange, the volume weighted average closing sale price per share
of the Common Stock for the thirty (30) consecutive trading days
immediately prior to such date of determination, as reported by the
national securities exchange;
(b) if
the Common Stock is not listed on a national securities exchange
but is listed in the over-the-counter market, the average last
quoted sale price for the Common Stock (or, if no sale price is
reported, the average of the high bid and low asked price for such
date) for the thirty (30) consecutive trading days immediately
prior to such date of determination, in the over-the-counter market
as reported by OTC Markets Group Inc. or other similar
organization; or
(c) in
all other cases,
(i) as
agreed upon in good faith by the Board of Directors and with
Majority Holders Consent, or
(ii) as
determined by an independent accounting, appraisal or investment
banking firm or consultant, in each case of nationally recognized
standing, engaged by the Company and selected by the Board of
Directors.
“FCC” means the Federal
Communications Commission, including any office, bureau, or
division thereof acting on delegated authority, and any successor
governmental agency performing functions similar to those performed
by the Federal Communications Commission on the date
hereof.
“FCC Approval” means the
FCC’s grant of approval of the Post-Emergence FCC
Applications; provided that the possibility that an appeal, request
for stay, or petition for reconsideration, rehearing, or review by
a court or administrative agency may be filed with respect to such
grant, or that the FCC may reconsider or review such grant on its
own motion, shall not prevent such grant from constituting FCC
Approval for purposes of the Amended Plan and this
Agreement.
“FCC Ownership Conditions” means
that, as reasonably determined by the Company, the issuance of
Special Warrant Shares, either alone or in combination with any
other existing or proposed ownership of Common Stock, does not
violate, as applicable at the time of such issuance: (i) the 9.75
Percent Limitation (as defined in the Amended Plan), (ii) the 22.5
Percent Limitation (as defined in the Amended Plan), (iii) the
terms of the Declaratory Ruling, or (iv) any provision of the
Communication Laws, FCC Restrictions, including but not limited to
any requirement to obtain the prior consent of the
FCC.
“FCC Restrictions” means the FCC
ownership and transfer restrictions set forth in Section [●]
of that certain stockholders agreement, dated the date hereof, by
and among the holders of Common Stock of the Company.
“FCC Rules” means the written
decisions, rules, orders, rulings and policies of the
FCC.
“Fully Diluted Shares” means the
Total Shares outstanding as of the applicable measurement date plus
all Common Stock then issuable upon the conversion of any
Convertible Securities at the then applicable conversion rate;
provided that, all
conditions to the convertibility and/or exercisability of
Convertible Securities shall be deemed to have been satisfied and
the number of shares issuable upon exercise of the Special Warrants
shall be deemed to be the number of Special Warrant Shares issuable
if the Special Warrants are exercised on a cashless basis pursuant
to Section 2.06(b) as of the date of determination.
“Governmental Authority” means any
(i) government, (ii) governmental or quasi-governmental authority
of any nature (including any governmental agency, branch,
department, official or entity and any court or other tribunal) or
(iii) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature, in each case, whether federal,
state, local, municipal, foreign, supranational or of any other
jurisdiction.
“Holders” has the meaning set forth
in the preamble.
“Issuance Notice” has the meaning
set forth in Section 2.11(a) hereof.
“Law” means the Communications Laws
and all other laws, statutes, rules, regulations, codes,
injunctions, decrees, orders, ordinances, registration
requirements, disclosure requirements and other pronouncements
having the effect of law of the United States, any foreign country
or any domestic or foreign state, county, city or other political
subdivision or of any Governmental Authority.
“Majority Holders Consent” means,
at any particular date, the consent, approval or vote of Persons
holding of record or deemed to be holding of record, at such date,
a majority of the total number of all Special Warrant Shares held
of record or deemed to be held of record by such Persons at such
date, assuming the Special Warrants had been exercised as of such
date in accordance with the terms of this Agreement.
“Management Incentive Plan” means
any plan or plans or arrangements, adopted by the Board of
Directors and from time to time in effect for the benefit of
directors, officers and/or other employees of or consultants to the
Company and/or any of its Subsidiaries, providing for the grant of
stock options, restricted stock or other equity incentive awards in
accordance with the terms and conditions therein stated or stated
in any accompanying agreements.
“Mandatory Exchange Date” has the
meaning set forth in Section 2.04(a).
“Organic Change” means any
recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company’s
equity securities or assets or any other transaction that is not in
the ordinary course of the Company’s business and is
reasonably likely to result in a material impact on the assets
(including revenues) or liabilities of the Company, in each case
which is effected in such a way that the holders of Common Stock
are entitled to receive (either directly or upon subsequent
liquidation) cash, stock, securities or other assets or property
with respect to or in exchange for shares of Common Stock, other
than a transaction which triggers an adjustment pursuant to
Sections 4.02 or 4.03.
“Ownership Certification” means a
written certification, in substantially the form attached hereto as
Exhibit
C, for the purpose of enabling the Company to determine (i)
whether a Holder’s potential level of voting interests and
equity interests in the Company are 100% owned, both directly and
indirectly, by a U.S. Holder (as defined in the Amended Plan), (ii)
if a Holder is not a 100% U.S. Holder, the potential level of
direct and indirect voting interests and equity interests of the
Company owned by such non-100% U.S. Holder that would be considered
foreign held interests, as determined in accordance with the
Communications Laws, (iii) whether the Holder (and any other
entities subject to aggregation under FCC Rules) would need to
obtain specific approval from the FCC in the Declaratory Ruling or
otherwise as required by FCC Rules in order to obtain Special
Warrant Shares; and (iv) whether the Holder will hold ten percent
(10%) or more of the outstanding Common Stock following the
exchange and/or exercise of Special Warrants and, therefore, must
be disclosed in the Post-Emergence FCC Applications pursuant to FCC
Rules.
“Parties” has the meaning set forth
in the preamble.
“Person” means any individual,
firm, corporation, partnership, limited partnership, limited
liability company, association, indenture trustee, organization,
joint stock company, joint venture, estate, trust, governmental
unit or any political subdivision thereof, or any other
entity.
“Post-Emergence FCC Applications”
means the applications filed with the FCC following the date hereof
seeking FCC consent to the assignment or transfer of control of the
FCC licenses in connection with the exchange of the Special
Warrants.
“Post-Emergence State PUC
Applications” means the applications filed with the
State PUCs (as defined in the Amended Plan) following the date
hereof seeking their consent to a change in the control or level of
ownership of the Company in connection with the exchange and/or
exercise of the Special Warrants.
“Preemptive Share Period” has the
meaning set forth in Section 2.11(b) hereof.
“Preemptive Shares” has the meaning
set forth in Section 2.11(a). “Price” has the meaning set forth
in Section 2.02.
“Proposed Shares” has the meaning
set forth in Section 2.11(a). “Registered Holder” has the meaning
set forth in Section 2.01(a).
“Regulatory Approval” means any
notice or approval which the Company (or any Subsidiary of the
Company) is required by applicable Law (including the
Communications Laws) to file with or obtain from, respectively, any
Governmental Authority with jurisdiction over the Company or its
Subsidiaries in order to issue Special Warrant Shares to a
Holder.
“Regulatory Ruling Notice” has the
meaning set forth in Section 2.03(c).
“SEC” means the Securities and
Exchange Commission or any other federal agency at the time
administering the Securities Act or the Exchange Act.
“Securities Act” means the
Securities Act of 1933, as amended.
“Special Warrant Register” has the
meaning set forth in Section 2.01(a).
“Special Warrant Shares” means the
shares of Common Stock issued or issuable upon the exchange and/or
exercise of a Special Warrant.
“Special Warrants” has the meaning
set forth in the Recitals.
“Subsidiary” means, with respect to
any Person, any corporation, partnership, limited liability company
or other business entity of which (i) if a corporation, a majority
of the total voting power of shares of stock entitled (without
regard to the occurrence of any contingency) to vote in the
election of directors is at the time owned or controlled, directly
or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a
partnership, limited liability company or other business entity
(other than a corporation), a majority of the partnership, limited
liability company or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall
be deemed to have a majority ownership interest in a partnership,
limited liability company or other business entity if such Person
or Persons shall be allocated a majority of partnership, limited
liability company or other business entity gains or losses or shall
be, or control, the general partner, the managing member or entity
performing similar functions of such partnership, limited liability
company or other business entity.
“Total Shares” means the total
number of shares of Common Stock outstanding from
time-to-time.
“Transfer” means any voluntary or
involuntary transfer, sale, assignment or other
disposition.
Section
1.02. Rules of
Construction.
(a) The
singular form of any word used herein, including the terms defined
in Section 1.01 hereof, shall include the plural, and vice versa.
The use herein of a word of any gender shall include correlative
words of all genders.
(b) Unless
otherwise specified, references to Articles, Sections and other
subdivisions of this Agreement are to the designated Articles,
Sections and other subdivision of this Agreement as originally
executed. The words “hereof,” “herein,” “hereunder” and words of similar
import refer to this Agreement as a whole.
(c) References
to “$” are to
dollars in lawful currency of the United States of
America.
(d) The
Exhibits attached hereto are an integral part of this
Agreement.
ARTICLE
2
TERMS ;
EXCHANGE AND EXERCISE OF SPECIAL WARRANTS
Section
2.01. Registration.
(a) The Company shall
keep, or cause to be kept, at an office designated for such
purpose, a record (the “Special Warrant Register”) in
which, subject to such reasonable regulations as it may prescribe,
it shall register the Special Warrants and exercises, exchanges,
cancellations and transfers of outstanding Special Warrants. No
service charge shall be made for any exercise, exchange or
registration of transfer of the Special Warrants, but the Company
may require payment of a sum sufficient to cover any stamp or other
tax or other charge that may be imposed on any Registered Holder in
connection with any such exercise, exchange or registration of
transfer.
(b) Prior to due
presentment for registration of transfer or exchange of any Special
Warrants in accordance with the procedures set forth in this
Agreement, the Company may deem and treat the Person in whose name
such Special Warrants are registered upon the Special Warrant
Register (the “Registered
Holder”) as the absolute owner of such Special
Warrants, for all purposes including, without limitation, for the
purpose of any exchange or exercise thereof (subject to Section
2.05(c)), and for all other purposes, and the Company shall not be
affected by notice to the contrary. The Company will not be liable
or responsible for any registration or transfer of any Special
Warrants that are registered or to be registered in the name of a
fiduciary or the nominee of a fiduciary.
Section
2.02. Price. Subject to the
provisions of this Agreement, each Special Warrant shall entitle
the Holder to purchase from the Company the number of Special
Warrant Shares represented by such Special Warrant (subject to
adjustment from time to time as provided in Article 3 hereof) at
the price of $0.01 per Special Warrant Share (subject to adjustment
from time to time as provided in Article 3, the “Price”).
Section
2.03. Filing of Post-Emergence FCC and State
PUC Applications and Petition for Declaratory Ruling; Notice of
Declaratory Ruling.
(a) In connection with
their execution of this Agreement, Holders shall submit to the
Company an Ownership Certification.
(b) As soon as
reasonably practicable thereafter but in any event within thirty
(30) days of the date hereof, the Company shall file the
Post-Emergence FCC Applications and the Petition for Declaratory
Ruling and within fifty (50) days of the date hereof shall file all
Post-Emergence State PUC Applications.
(c) As soon as
reasonably practicable, and in any event within five (5) Business
Days following receipt of the Declaratory Ruling and the receipt of
all other required Regulatory Approvals, including the FCC Approval
and the approvals of the Post-Emergence State PUC Applications, the
Company shall send a notice to Holders describing the key terms of
such Regulatory Approvals, include the Declaratory Ruling (the
“Regulatory Ruling
Notice”), which notice shall include:
(i) the percentage of
foreign ownership of the Company permitted by the Declaratory
Ruling, whether all or a portion of the outstanding Special
Warrants may be exchanged and/or exercised consistent with the
Regulatory Approvals, the Declaratory Ruling, Section 2.04, any
other applicable limitations on foreign ownership of the Company
and any other terms and conditions imposed by the U.S. Government
as a condition of the grant of the Regulatory Approvals;
and
(ii) the
date on which the Special Warrants Shares will be issued in
book-entry form in exchange for the Special Warrants.
Section
2.04. Mandatory Exchange; Subsequent
Exchanges.
(a) Within five (5)
Business Days of the delivery of the Regulatory Ruling Notice (such
date, the “Mandatory Exchange
Date”), outstanding Special Warrants shall be
exchanged, the Holders shall pay the Company the Price (as such
price may be adjusted pursuant to Article 3), and the Special
Warrant Shares shall be issued by the Company to the respective
Holders in book-entry form in accordance with, and subject to, the
following criteria:
(i) With respect to any
Holder that has (A) been disclosed in the Post-Emergence FCC
Applications, the Petition for Declaratory Ruling and the
Post-Emergence State PUC Applications and (B) to the extent
required, obtained specific approval in the Declaratory Ruling in
accordance with applicable FCC Rules, all of such Holder’s
Special Warrants shall be exchanged and the corresponding Special
Warrant Shares purchased and issued, subject to any limitation(s)
set out in the Declaratory Ruling.
(ii) For
any Holder that has not been disclosed in the Post-Emergence FCC
Applications, the Petition for Declaratory Ruling and/or the
Post-Emergence State PUC Applications, such Holder’s Special
Warrants shall be exchanged for the number of Special Warrant
Shares which, when aggregated with any other shares of Common Stock
held or to be held by such Holder or any other entity whose
interests are subject to aggregation with such Holder’s
interests in accordance with FCC Rules, would result in such Holder
holding (A) no more than 4.99% of the Total Shares, or (B) with
respect to a Holder that does not need to obtain specific approval
from the FCC in order to hold more than 5% of the Total Shares and
has made the appropriate election in the Ownership Certification,
an amount of Special Warrant Shares that would result in such
Holder holding no more than 9.75% of the Total Shares.
(iii) To
the extent that the foregoing results in a Holder being unable to
exchange its Special Warrant in full, such Holder shall be issued a
new Special Warrant representing the difference between the number
of Special Warrant Shares issuable pursuant to its initial Special
Warrant and the number of Special Warrant Shares issued to such
Holder on the Mandatory Exchange Date.
(b) Following the
initial exchange of Special Warrants as set forth in (a) above,
Holders shall be permitted to exercise their Special Warrants on
any Business Day prior to the Expiration Date, subject to the
following:
(i) the Holder seeking
to exercise its Special Warrant has completed and delivered to the
Company an Exercise Form and an Ownership Certification no less
than ten (10) Business Days prior to the proposed Exercise Date for
such Special Warrant(s);
(ii) based
on the Exercise Form and Ownership Certification delivered to the
Company pursuant to Section 2.04(b)(i), the Company shall, prior to
the proposed Exercise Date, determine whether the issuance of some
or all of the requested Special Warrant Shares (x) would cause the
Company to violate the Communication Laws, the terms of the
Declaratory Ruling or the FCC Restrictions and (y) is exempt from
the registration requirements of the Securities Act and state
securities Laws; provided that, the Company shall have the right to
request from the Holder any additional information that it
determines to be reasonably necessary to ensure that the exercise
would not violate the Securities Act, state securities laws, the
FCC Ownership Conditions, the Communications Laws, and the
Declaratory Ruling;
(iii) If
the Company reasonably determines, pursuant to (ii) preceding, that
it may issue some or all of the Special Warrant Shares sought in
the Exercise Form without further regulatory approval(s), the
Company shall, subject to subsection (iv) below, promptly issue to
the Holder, in book entry form, the number of Special Warrant
Shares representing the lesser of (i) the number of Special Warrant
Shares sought in the Exercise Form and (ii) the maximum number of
Special Warrant Shares that may be issued to the Holder in
compliance with the FCC Ownership Conditions. To the extent that
the number of Special Warrant Shares issued by the Company to the
Holder is less than the total number of Special Warrants held by
such Holder, the Company shall issue to the Holder a new Special
Warrant representing such remaining amount; and
(iv) To
the extent that the Company reasonably determines, pursuant to (ii)
preceding, that a request to exercise a Special Warrant requires
the Company or a Holder to seek and obtain prior approval from the
FCC or any State PUC, including, without limitation, in order to
obtain any specific approval required pursuant to the terms of the
Declaratory Ruling or otherwise by the Communications Laws before
issuing all requested Special Warrant Shares, the Company shall
issue the number of Special Warrant Shares for which prior
regulatory approval is not required and shall file such
application(s) and/or request(s) with the appropriate Governmental
Authority(ies) as are necessary to issue the balance of the
requested Special Warrant Shares, within thirty (30) days following
receipt of all required information from the Holder. The Company
shall have the right to request such Holder to provide all
information that it reasonably determines is required to comply
with the Communications Laws and applicable rules of any State PUC.
Within five (5) Business Days of obtaining all such necessary
approvals, the Company shall issue to the Holder, in book-entry
form, the balance of the requested number of Special Warrant
Shares.
Section
2.05. Method of Exchange and/or
Exercise.
(a) Any exchange and/or
exercise of Special Warrants pursuant to the terms of this
Agreement shall be irrevocable as of the date of delivery of the
Special Warrant Shares and shall constitute a binding agreement
between the Holder and the Company, enforceable in accordance with
the terms of this Agreement.
(b) The Company
reserves the right to reject any and all Exercise Forms that it
reasonably determines are not in proper form or for which any
corresponding agreement by the Company to process an exercise
would, in the reasonable opinion of the Company’s counsel, be
inconsistent with this Agreement or with the Communications Laws or
be otherwise unlawful. Any such determination by the Company shall
be final and binding on the Holders, absent manifest error;
provided that the Company shall provide a Holder with the
opportunity to correct any defects in its Exercise Form. The
Company further reserves the right to request such information
(including, without limitation, information with respect to
citizenship, other ownership interests and Affiliates) as the
Company may deem necessary, in its reasonable discretion, to
determine whether an exercise or exchange would without regulatory
approval (i) be inconsistent with the Communications Laws or
otherwise unlawful, (ii) subject the Company to any limitation
under the Communications Laws that would not apply to the Company
but for such exercise or exchange, or (iii) limit or impair any
business activities of the Company under the Communications Laws.
To the extent a Holder does not provide such information within ten
(10) Business Days), the Company may reject the Exercise Form
(without prejudicing such Holder’s ability to deliver a
subsequent Exercise Form). Subject to the Communications Laws and
other applicable Law, the Company reserves the absolute right to
waive any of the conditions to any particular Special Warrant
exercise or any defects in the Exercise Form(s). The Company shall
provide prompt written notice to the Holder of any such rejection
or waiver.
(c) In connection with
the exchange and/or exercise of a Special Warrant, (i) the Holder
shall surrender its Special Warrant to the Company and (ii) the
applicable Price for the Special Warrant Shares to be purchased,
which Price may be paid, at the option of such Holder, either (x)
in United States dollars by wire transfer to an account specified
in writing by the Company, in immediately available funds or (y) by
cashless exercise as set forth in Section 2.05(d).
(d) In lieu of paying
the Price by wire transfer of U.S. dollars, a Holder may elect to
exercise a Special Warrant by authorizing the Company to withhold
and not issue to such Holder, a number of Special Warrant Shares
equal to (x) the number of Special Warrant Shares for which the
Special Warrant is being exercised, multiplied by (y) the Price,
and divided by (z) the Fair Market Value on the applicable Exercise
Date (and such withheld Special Warrant Shares shall no longer be
issuable under such Special Warrant, and the Holder shall not have
any rights or be entitled to any payment with respect to the
withheld Special Warrant Shares). To the extent that the
distribution of Special Warrant Shares, in combination with the
withholding of Special Warrant Shares pursuant to this provision,
does not represent all of the Special Warrant Shares issuable upon
exchange and/or exercise of the Special Warrant, the Holder shall
retain its right to the issuance of the remaining Special Warrant
Shares, and the Company shall issue a new Special Warrant
representing such remaining amount.
(e) Upon the exchange
and/or exercise of any Special Warrant, the Company shall, as
promptly as practicable following such exchange and/or exercise,
provide the Holder a written statement as to the total number of
Special Warrant Shares issued in book-entry form in the name of the
Holder (including an explanation of any adjustments made pursuant
to this Section 2.05 and Article 3, if applicable).
(f) Notwithstanding any
provisions contained herein to the contrary, no Holder shall be
entitled to exercise or exchange a Special Warrant until all
Regulatory Approvals required to be obtained from any Governmental
Authority with jurisdiction over the Company or its Subsidiaries
have been obtained. In the event that all required Regulatory
Approvals are not received, the Holders shall continue to hold
their Special Warrants. For the avoidance of doubt, the Company may
prohibit the exercise of, or abstain from exchanging, Special
Warrants which would, in the Company’s reasonable judgement,
cause the Company or any of its Subsidiaries to be in violation of
the Communications Laws.
Section
2.06. Issuance of Special Warrant
Shares.
(a) Upon the
effectiveness of any exchange or exercise of any Special Warrant
pursuant to Section 2.04 and subject to the limitations set forth
therein, the Company shall, subject to Section 2.08, promptly at
its expense, and in no event later than five (5) Business Days
after the Mandatory Exchange Date and/or the applicable Exercise
Date, cause to be issued as directed by the Holder of such Special
Warrant the total number of whole Special Warrant Shares for which
such Special Warrant is being exchanged or exercised (as the same
may have been adjusted pursuant to Article 3) pursuant to the terms
of this Agreement in such denominations as are requested by each
Holder and registered as directed by each such Holder.
(b) The Special Warrant
Shares shall be deemed to have been issued at the time at which all
of the conditions to such exchange or exercise set forth in Section
2.04 and Section 2.05, as applicable, have been fulfilled, and the
Holder, or other Person to whom the Holder shall direct the
issuance thereof, shall be deemed for all purposes to have become
the holder of such Special Warrant Shares at such
time.
Section
2.07. Reservation of Shares of Common
Stock.
(a) The Company shall
at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of issuance
upon the exchange and exercise of the Special Warrants, a number of
shares of Common Stock equal to the aggregate Special Warrant
Shares issuable upon the exchange and exercise of all outstanding
Special Warrants. The Company shall take all such reasonable
actions as may be necessary to assure that all such Special Warrant
Shares may be so issued without violating the Company’s
governing documents or any applicable Laws. The Company shall not
take any action which would cause the number of authorized but
unissued shares of Common Stock to be less than the number of
Special Warrant Shares required to be reserved hereunder for
issuance upon exchange and exercise of the Special
Warrants.
(b) The Company
covenants that it will take such actions as may be necessary or
appropriate so that all Special Warrant Shares issued upon exchange
and/or exercise of the Special Warrants will, upon issuance in
accordance with the terms of this Agreement, be fully paid and
non-assessable, and free from any and all (i) security interests
created by or imposed upon the Company and (ii) taxes, liens and
charges with respect to the issuance thereof. If at any time the
number of authorized but unissued shares of Common Stock is
insufficient to permit exercise in full, or the exchange of 100%,
of the Special Warrants, the Company will as promptly as
practicable take such corporate action as may, in the opinion of
its counsel, be reasonably necessary (including seeking stockholder
approval, if required) to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be
sufficient for such purposes.
(c) The Company
represents and Special Warrants to the Holders that the issuance of
the Special Warrants and the Special Warrant Shares in accordance
with the terms hereof will not constitute a breach of, or a default
under, any other material agreements to which the Company is a
party on the date hereof.
Section
2.08. Fractional Shares.
Notwithstanding any provision to the contrary contained in this
Agreement, the Company shall not be required to issue a fraction of
a Special Warrant Share, and in any case where the Holder of a
Special Warrant would, except for the provisions of this Section
2.08, be entitled under the terms thereof to receive a fraction of
a Special Warrant Share, the Company shall, upon the exchange
and/or exercise of such Special Warrant, issue or cause to be
issued only the largest whole number of Special Warrant Shares
issuable upon such exercise (and such fraction of a share will be
disregarded, and the Holder shall not have any rights or be
entitled to any payment with respect to such fraction of a Special
Warrant Share); provided that the number of whole Special Warrant
Shares which shall be issuable upon the contemporaneous exchange
and/or exercise of any Special Warrant shall be computed on the
basis of the aggregate number of Special Warrant Shares issuable
upon exchange and/or exercise of all such Special
Warrants.
Section
2.09. Close of Books; Par
Value.
(a) Except as required
to comply with the Communications Laws and other Laws, the Company
shall not close its books against the transfer of any Special
Warrants or any Special Warrant Shares in any manner which
interferes with the timely exchange and/or exercise of such Special
Warrants.
(b) Without limiting
Section 2.07(b),
(i) the Company shall,
from time to time, take all reasonable action as may be necessary
to ensure that the par value per share of the unissued Special
Warrant Shares acquirable upon exchange and/or exercise of the
Special Warrants is at all times equal to or less than the Price
then in effect; and
(ii) the
Company will not increase the stated or par value per share, if
any, of the unissued Special Warrant Shares above the Price per
share in effect immediately prior to such increase in stated or par
value.
Section
2.10. Payment of Taxes. In connection
with the exercise and/or exchange of Special Warrants, the Company
shall not be required to pay any tax or other charge imposed in
respect of any transfer involved in the Company’s issuance
and delivery of Special Warrant Shares (including certificates
therefor) (or any payment of cash or other property in lieu of
Special Warrant Shares) to any recipient other than the Holder of
the Special Warrants being exchanged and/or exercised, and in case
of any such tax or other charge, the Company shall not be required
to issue or deliver any Special Warrant Shares (or cash or other
property in lieu of Special Warrant Shares) until (x) such tax or
charge has been paid or an amount sufficient for the payment
thereof has been delivered to the Company or (y) it has been
established to the Company’s satisfaction that any such tax
or other charge that is or may become due has been
paid.
Section
2.11. Pre-emptive
Rights.
(a) Subject to Section
2.11(d), in the event that the Company proposes to sell or
otherwise issue new Common Stock or Convertible Securities (the
“Preemptive
Shares”), in each case, each Holder shall have the
right to acquire that number or amount of such new Preemptive
Shares, at the price and upon the same terms and conditions as such
Preemptive Shares are to be offered or placed by the Company, as
shall enable such Holder to maintain the percentage equity interest
of such Holder in the Company on a Fully Diluted Shares basis
immediately prior to such issuance subject to obtaining all
Regulatory Approvals, if any, required to acquire such Preemptive
Shares. The Company shall provide written notice (an
“Issuance
Notice”) of any proposed issuance that shall set forth
the material terms and conditions of the proposed issuance,
including: (i) the number of Preemptive Shares proposed to be
issued (the “Proposed
Shares”) and the percentage of the Company’s
outstanding Total Shares, on a Fully Diluted Shares basis, that
such issuance would represent; (ii) the proposed issuance date,
which shall be at least ten (10) Business Days from the date of the
Issuance Notice; and (iii) the proposed purchase price per share of
the Preemptive Shares. No such Preemptive Shares shall be issued by
the Company to any Person unless the Company has delivered an
Issuance Notice in accordance with this Section 2.11(a) at least
ten (10) Business Days prior to the date of such issuance, or such
issuance is subject to the right of each Holder to acquire such
Preemptive Shares pursuant to this Section 2.11 within ten (10)
Business Days of notice of the Company’s intent to effect
such issuance.
(b) Each Holder shall
for a period of ten (10) Business Days following the receipt of an
Issuance Notice (the “Preemptive Share Period”) have the
right to irrevocably elect to purchase, at the purchase price set
forth in the Issuance Notice, subject to receipt of all Regulatory
Approvals, if any, an amount of Preemptive Shares less than or
equal to the product of (x) the total number of Proposed Shares and
(y) a fraction determined by dividing (i) the number of Total
Shares beneficially owned by such Holder immediately prior to such
issuance, assuming the Special Warrants of such Holder are
exercised on a cashless basis pursuant to Section 2.05(d) by (ii)
the Total Shares outstanding on such date immediately prior to such
issuance, calculated on a Fully Diluted Shares basis, by delivering
a written notice to the Company. If the Company is proposing to
issue, sell or distribute Preemptive Shares for consideration other
than all cash, and subject to the limitations on the rights set
forth in this Section 2.11, the Company shall accept from the
Holder either non-cash consideration that is reasonably comparable
to the non-cash consideration proposed by the Company or the cash
value of such non-cash consideration, in each case as determined by
the Board of Directors in good faith. Such Holder’s election
to purchase Preemptive Shares shall be binding and irrevocable. If
the Holder fails to duly elect to purchase Preemptive Shares prior
to the end of the Preemptive Share Period, such Holder shall be
deemed to have elected not to purchase any Preemptive
Shares.
(c) No later than five
(5) Business Days following the expiration of the Preemptive Share
Period, the Company shall notify the Holder in writing of the
number of Preemptive Shares, if any, that such Holder has agreed to
purchase. In the event the Holder fails to exercise its right under
this Section 2.11 to purchase Preemptive Shares, following the date
of the expiration of the Preemptive Share Period, the Company shall
be free to complete the proposed issuance or sale of Preemptive
Shares described in the Issuance Notice with respect to any
Preemptive Shares not elected to be purchased pursuant to this
Section 2.11 in accordance with the terms and conditions set forth
in the Issuance Notice so long as such issuance or sale is closed
within sixty (60) Business Days after the expiration of such
Preemptive Share Period. In the event the Company has not sold such
Preemptive Shares within such sixty (60) Business Day period, the
Company may not thereafter issue or sell such Preemptive Shares
without first again offering the Preemptive Shares to the Holders
in accordance with the procedures set forth in this Section
2.11.
(d) This Section 2.11
shall not apply to the issuance of any capital stock or rights: (i)
pursuant to the exercise, conversion or exchange of any Convertible
Securities or rights in accordance with their terms if such
Convertible Securities were issued prior to the date hereof or if
such rights being exercised, converted or exchanged were issued by
the Company after the date hereof in compliance with the provisions
of this Section 2.11; (ii) pursuant to the Management Incentive
Plan; (iii) as consideration in any consolidation, merger, payment
for any bona fide ordinary course third-party services or any
similar transaction involving the Company or any of its
Subsidiaries or as consideration for the bona fide acquisition by
the Company or any of its Subsidiaries of assets or another
business entity; (iv) pursuant to any public offering pursuant to
the Securities Act; (v) as Special Warrant Shares upon exchange or
exercise of the Special Warrants; and (vi) to the Company or a
wholly-owned Subsidiary thereof.
ARTICLE
3
ADJUSTMENT
OF PRICE AND NUMBER OF SPECIAL WARRANT SHARES
In
order to prevent dilution of the rights granted under the Special
Warrants, the Price shall be subject to adjustment from time to
time as provided in this Article 3, and the number of Special
Warrant Shares issuable upon exchange and/or exercise of each
Special Warrant shall be subject to adjustment from time to time as
provided in this Article 3.
Section
3.01. [Reserved].
Section
3.02. Subdivision or Combination of Common
Stock. In the event that the amount of outstanding Total
Shares is increased or decreased by combination (by reverse stock
split or reclassification) or subdivision (by any stock split or
reclassification) of any Common Stock, then, on the effective date
of such combination, subdivision or distribution, the number of
Special Warrant Shares issuable on exchange and/or exercise of the
Special Warrants then outstanding shall be increased or decreased,
as applicable, in proportion to such increase or decrease, as
applicable, in the outstanding Total Shares. Whenever the number of
Special Warrant Shares that would be issued upon the exchange
and/or exercise of the Special Warrants then outstanding is
adjusted pursuant to this Section 3.02, the Price (or upon the
occurrence of a record date with respect thereto) shall be adjusted
(to the nearest one one-hundredth of one cent ($0.0001)) by
multiplying such Price immediately prior to such adjustment by a
fraction (a) the numerator of which shall be the number of Special
Warrant Shares issuable upon the exchange and/or exercise of the
Special Warrants then outstanding immediately prior to such
adjustment and (b) the denominator of which shall be the number of
Special Warrant Shares so issuable immediately
thereafter.
Section
3.03. Distributions. The Holders of
the Special Warrants shall not be entitled to receive any
distributions from the Company on account of any Special Warrants.
If the Company at any time after the issuance of the Special
Warrants fixes a record date for the making of a distribution to
holders of shares of any Common Stock or other securities,
evidences of indebtedness, assets, cash, Special Warrants, other
property, or any other rights (excluding dividends or distributions
referred to in Section 3.02), then, in each such case, the Price
and the number of Special Warrant Shares for which the Special
Warrants remain exchangeable or exercisable shall each be
proportionately adjusted to reflect any such dividends or
distributions, to the extent that such adjustments would not
violate the Communications Laws or any other applicable
Law.
Section
3.04. [Reserved].
Section
3.05. Reorganization, Reclassification,
Consolidation, Merger or Sale. In connection with an Organic
Change, each Holder shall have the right to acquire and receive,
upon the subsequent exercise of Special Warrants, such cash, stock,
securities or other assets or property as would have been issued or
payable in such Organic Change (if such Holder had exercised such
Special Warrant immediately prior to such Organic Change) with
respect to, or in exchange for the number of Special Warrant Shares
that would have been issued upon exchange and/or exercise of such
Special Warrant, if such Special Warrant had been exchanged and/or
exercised immediately prior to the occurrence of such Organic
Change. The Company shall not effect an Organic Change unless,
prior to the consummation thereof, the surviving Person (if other
than the Company) resulting from the Organic Change, shall assume,
by written instrument substantially similar in form and substance
to this Agreement in all material respects (including with respect
to the provisions of Article 3), the obligation to deliver to the
Holder such cash, stock, securities or other assets or property
which, in accordance with the foregoing provision, the Holder shall
be entitled to receive upon exchange and/or exercise of the Special
Warrant. The provisions of this Section 3.05 shall similarly apply
to successive Organic Changes.
Section
3.06. Notice of Adjustments. Whenever
the number and/or kind of Special Warrant Shares or the Price is
adjusted as herein provided, the Company shall (i) prepare, or
cause to be prepared, a written statement setting forth the
adjusted number and/or kind of shares issuable upon the exchange
and/or exercise of Special Warrants and the Price of such shares
after such adjustment, the facts requiring such adjustment and the
computation by which adjustment was made, and (ii) give written
notice to the Holders in the manner provided in Section 6.02 below,
of the record date or the effective date of the event. Failure to
give such notice, or any defect therein, shall not affect the
legality or validity of any action taken in accordance with this
Section 3.06. Notwithstanding anything to the contrary contained
herein, the Company shall not be obligated to provide notice of any
event if the Company determines, in its sole discretion, that the
provision of such notice would violate the Communications Laws, the
Securities Act, or any other applicable Law.
Section
3.07. Deferral or Exclusion of Certain
Adjustments. No adjustment to the Price or the number of
Special Warrant Shares shall be required hereunder unless such
adjustment together with other adjustments carried forward as
provided below, would result in an increase or decrease of at least
one percent (1%) of the applicable Price or the number of Special
Warrant Shares; provided that any adjustments which by reason of
this Section 3.07 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment that
exceeds one percent (1%) of the applicable Price or the number of
Special Warrant Shares. All calculations under this Section shall
be made to the nearest one one-hundredth of one cent ($0.0001) or
to the nearest one one-hundredth (1/100) of a share,
respectively.
ARTICLE
4
TRANSFER
AND EXCHANGE OF SPECIAL WARRANTS
Section
4.01. Registration of Transfers and
Exchanges. When Special Warrants are presented to the
Company with a written request (a) to register the Transfer of such
Special Warrants or (b) to exchange such Special Warrants for an
equal number of Special Warrants of other authorized denominations,
the Company shall register the Transfer or make the exchange, as
requested if its customary requirements for such transactions are
met, provided that (i) the Company shall have received (x) a
written instruction of Transfer in form satisfactory to the
Company, duly executed by the Registered Holder thereof or by the
Holder’s attorney, duly authorized in writing along with
evidence of authority that may be required by the Company, and (y)
a written order of the Company signed by an officer of the Company
authorizing such exchange, and (ii) if reasonably requested by the
Company, a written opinion of counsel reasonably acceptable to the
Company that such Transfer is in compliance with the Securities
Act, applicable state securities Law, and the Communication
Laws.
Section
4.02. Restrictions on Exchanges and
Transfers. No Special Warrants shall be sold, exchanged or
otherwise Transferred in violation of the Securities Act, state
securities Laws, the Communication Laws or the Company’s
articles of incorporation or other governing documents. If any
Holder purports to Transfer Special Warrants to any Person in a
transaction that would violate the provisions of this Section 4.02,
such Transfer shall be void ab initio and of no
effect.
Section
4.03. Obligations with Respect to Transfers
and Exchanges of Special Warrants.
(a) All Special
Warrants issued upon any registration of Transfer or exchange of
Special Warrants shall be the valid obligations of the Company,
entitled to the same benefits under this Agreement as the Special
Warrants surrendered upon such registration of Transfer or
exchange. No service charge shall be made to a Registered Holder
for any registration, Transfer or exchange of any Special Warrants,
but the Company may require payment of a sum sufficient to cover
any stamp or other tax or other charge that may be imposed on the
Registered Holder in connection with any such exchange or
registration of Transfer. The Company shall have no obligation to
effect an exchange or register a Transfer unless and until it is
satisfied that all such taxes and/or charges have been
paid.
(b) Subject to Section
4.01 and this Section 4.03, the Company shall, upon receipt of all
information required to be delivered hereunder, from time to time
register the Transfer of outstanding Special Warrants in the
Special Warrant Register, upon delivery by the Registered Holder
thereof, at the Company’s office designated for such purpose,
of a form of assignment substantially in the form of Exhibit D
hereto, properly completed and duly executed by the Registered
Holder thereof or by the duly appointed legal representative
thereof or by a duly authorized attorney of the Registered
Holder.
Section
4.04. Fractional Special Warrants.
The Company shall not affect any registration of Transfer or
exchange which will result in the issuance of a fraction of a
Special Warrant.
ARTICLE
5
OTHER
PROVISIONS RELATING TO RIGHTS OF HOLDERS OF SPECIAL
WARRANTS
Section
5.01. No Rights or Liability as
Stockholder. Nothing contained herein shall be construed as
conferring upon any Holder or his, her or its transferees the right
to vote or to consent or to receive notice as a stockholder in
respect of any meeting of stockholders for the election of
directors of the Company or of any other matter, or any rights
whatsoever as a stockholder of the Company on account of the
Special Warrants. The vote or consent of Holders shall not be
required with respect to any action or proceeding of the Company on
account of the Special Warrant he, she or it holds. No Holder shall
have any right not expressly conferred hereunder or under or by
applicable Law with respect to the Special Warrants held by such
Holder. No mere enumeration in any document of the rights or
privileges of any Holder shall give rise to any liability of such
Holder for the Price hereunder or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors
of the Company. Holders of Special Warrant Shares issued upon
exchange and/or exercise of the Special Warrants shall have the
same voting and other rights and be subject to the same obligations
as other holders of Common Stock in the Company.
Section
5.02. Notice to Registered Holders.
The Company shall give notice to Registered Holders in accordance
with the notice provisions herein if at any time prior to the
exercise in full, or exchange for one hundred percent (100%) of the
Special Warrants, any of the following events shall
occur:
(a) an Organic
Change;
(b) a dissolution,
liquidation or winding up of the Company; or
(c) the occurrence of
any other event that would result in an adjustment to the Price or
the number of Special Warrant Shares issuable upon the exchange
and/or exercise of the Special Warrants under Article
3.
The
Company must provide such notice at least five (5) Business Days
prior to the date fixed as the record date or the date of closing
of the Company’s stock transfer books for the determination
of the stockholders entitled to such dividend, distribution or
subscription rights, or of the stockholders entitled to vote on
such Organic Change, dissolution, liquidation or winding up of the
Company or any other event that would result in an adjustment to
the Price or the number of Special Warrant Shares issuable upon the
exchange and/or exercise of the Special Warrants under Article 3.
Such notice shall specify such record date or the date of closing
the stock transfer books or proposed effective date, as the case
may be. Failure to provide such notice shall not affect the
validity of any action taken. For the avoidance of doubt, no such
notice (or the failure to provide it to the Holders) shall
supersede or limit any adjustment called for by Article 3 by reason
of any event as to which notice is required by this Section.
Notwithstanding anything to the contrary contained herein, the
Company shall not be obligated to provide notice of any event if
the Company determines, in its sole discretion, that the provision
of such notice would violate the Communications Laws, the
Securities Act, the Exchange Act or any other applicable
Law.
Section
5.03. Cancellation of Special
Warrants. If the Company shall purchase or otherwise acquire
Special Warrants, such Special Warrants shall be cancelled and
retired by appropriate notation on the Special Warrant
Register.
ARTICLE
6
MISCELLANEOUS
PROVISIONS
Section
6.01. Binding Effects; Benefits. This
Agreement shall inure to the benefit of and shall be binding upon
the Company and the Holders and their respective heirs, legal
representatives, successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to or shall confer on any Person
other than the Company and the Holders, or their respective heirs,
legal representatives, successors or assigns, any rights, remedies,
obligations or liabilities under or by reason of this
Agreement.
Section
6.02. Notices. Any notice or other
communication required or which may be given hereunder shall be in
writing and shall be sent by certified or regular mail (return
receipt requested, postage prepaid), by private national courier
service or by personal delivery. Such notice or communication shall
be deemed given (i) if mailed, two (2) days after the date of
mailing, (ii) if sent by national courier service, one (1) Business
Day after being sent, (iii) if delivered personally, when so
delivered, or (iv) if sent by e-mail, on the date so sent in each
case as follows:
if to
the Company, to:
Fusion
Connect, Inc.
210
Interstate North Parkway, Suite 300
Atlanta, Georgia
30339
Attn:
James P. Prenetta, Jr., Executive Vice President and
General
Counsel
E-mail:
jprenetta@fusionconnect.com
With a
copy, which shall not constitute notice, to:
[
]
if to
the Holders, to:
[●]
[●]
[●]
Attention:
[●]
With a
copy, which shall not constitute notice, to:
[
]
Section
6.03. Persons Having Rights under this
Agreement. Nothing in this Agreement expressed and nothing
that may be implied from any of the provisions hereof is intended,
or shall be construed, to confer upon, or give to, any Person or
corporation other than the Parties, any right, remedy, or claim
under or by reason of this Agreement or of any covenant, condition,
stipulation, promise, or agreement hereof. All covenants,
conditions, stipulations, promises, and agreements contained in
this Agreement shall be for the sole and exclusive benefit of the
Parties, their successors and permitted assigns.
Section
6.04. Examination of this Agreement.
A copy of this Agreement, and of the entries in the Special Warrant
Register relating to a Registered Holder’s Special Warrant,
shall be available at all reasonable times at an office designated
for such purpose by the Company, for examination by the Registered
Holder.
Section
6.05. Counterparts. This Agreement
may be executed in any number of original or electronic PDF
counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
Section
6.06. Effect of Headings. The section
headings herein are for convenience only and are not part of this
Agreement and shall not affect the interpretation
hereof.
Section
6.07. Amendments and Waivers. Except
as otherwise provided by clause (b) of this Section 6.07, and
except as otherwise expressly required by any other provisions of
this Agreement, none of the terms or provisions contained in this
Agreement and none of the agreements, obligations or covenants of
the Company contained in this Agreement may be amended, modified,
supplemented, waived or terminated unless (i) the Company shall
execute an instrument in writing agreeing or consenting to such
amendment, modification, supplement, waiver or termination, and
(ii) the Company shall receive prior Majority Holders Consent
therefor; provided,
however, that if, by its
terms, any such amendment, modification, supplement, waiver or
termination disproportionately and adversely affects the rights of
any Holder as compared to the rights of all of the other Holders
(other than as reflected by the different number of Special
Warrants and/or Special Warrant Shares held by the Holders), then,
the prior written agreement of such Holder shall be required;
provided, further, that the unanimous and affirmative vote or
consent of the Holders shall be required for any amendment that (A)
reduces the term of the Special Warrants (or otherwise modifies any
provisions pursuant to which the Special Warrants may be terminated
or cancelled), (B) increases the Price and/or decreases the number
of Special Warrant Shares (or, as applicable, the amount of such
other securities and/or assets) deliverable upon exchange and/or
exercise of the Special Warrants, other than such increases and/or
decreases that are made pursuant to Article 3 or (C) modifies, in a
manner adverse to the Holders generally, the anti-dilution
provisions set forth in Article 3.
(a) The Company and the
Holders may from time to time supplement or amend this Agreement or
the Special Warrants, without the approval of the Holders in order
to cure any ambiguity, manifest error or other mistake in this
Agreement or the Special Warrants, or to correct or supplement any
provision contained herein or in the Special Warrants that may be
defective or inconsistent with any other provision herein or in the
Special Warrants, or to make any other provisions in regard to
matters or questions arising hereunder that the Company may deem
necessary or desirable and that shall not adversely affect, alter
or change the interests of the Holders in any material
respect.
(b) In connection with
any action taken or to be taken pursuant to this Section 6.07,
there shall be no obligation or requirement on the part of the
Company, the Holders or any other Persons (i) to solicit or to
attempt to solicit from the Holders the consent or approval of the
Holders for such action, or (ii) to submit any notices of any kind
to the Holders in advance of any action proposed to be taken
pursuant to this Section 6.07. However, copies of all written
consents or approvals given by the Holders in connection with any
action taken or to be taken pursuant to and in compliance with this
Section 6.07 shall be sent by the Company, promptly after the
receipt thereof by the Company, to any Person holding Special
Warrant Shares who shall have failed or refused to give a written
consent or approval for such action.
(c) Any amendment,
modification or waiver effected pursuant to and in accordance with
the provisions of this Section 6.07 shall be binding upon the
Holders and upon the Company, including any Person holding Special
Warrant Shares who shall have failed or refused to give a written
consent or approval for such amendment, modification or waiver. In
the event of any amendment, modification or waiver, the Company
shall give prompt notice thereof to all Registered Holders. Any
failure of the Company to give such notice or any defect therein
shall not, however, in any way impair or affect the validity of any
such amendment.
(d) No amendment or
waiver such as contemplated in this section 6.07 shall result in a
violation of any Laws, including the Communications
Laws.
Section
6.08. No Inconsistent Agreements; No
Impairment. The Company shall not, on or after the date
hereof, enter into any agreement with respect to its securities
which conflicts with the rights granted to the Holders in this
Agreement. The Company represents and Special Warrants to the
Holders that the rights granted hereunder do not in any way
conflict with the rights granted to holders of the Company’s
securities under any other agreements. The Company will at all
times in good faith assist in the carrying out of all the
provisions of the Special Warrants and in the taking of all such
action as may be necessary in order to preserve the exercise rights
of the Holders against impairment.
Section
6.09. Integration/Entire Agreement.
This Agreement, together with the Special Warrants, is intended by
the Parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and
understanding of the Company and the Holders in respect of the
subject matter contained herein. There are no restrictions,
promises, Special Warranties or undertakings, other than those
expressly set forth or referred to herein, with respect to the
Special Warrants. This Agreement supersedes all prior agreements
and understandings among the Parties with respect to the Special
Warrants and, to the extent of any inconsistency between this
Agreement and the Special Warrant, this Agreement shall
control.
Section
6.10. Governing Law, Etc. This
Agreement and each Special Warrant issued hereunder shall be deemed
to be a contract made under the Laws of the State of Delaware and
for all purposes shall be governed by, and construed and enforced
in accordance with, the Laws of the State of Delaware without
regard to conflict of law principles and any applicable Laws of the
United States of America. Each Party consents and submits to the
exclusive jurisdiction of the courts of the State of Delaware in
connection with any action or proceeding brought against it that
arises out of or in connection with, that is based upon, or that
relates to this Agreement or the transactions contemplated hereby.
In connection with any such action or proceeding in any such court,
each Party hereby waives personal service of any summons, complaint
or other process and hereby agrees that service thereof may be made
in accordance with the procedures for giving notice set forth in
Section 6.02 hereof. Each Party hereby waives any objection to
jurisdiction or venue in any court in any action or proceeding and
agrees not to assert any defense based on forum non conveniens or
lack of jurisdiction or venue in any court in any action or
proceeding.
Section
6.11. Termination. This Agreement
will terminate on the date when all Special Warrants have been
exercised. The provisions of this Article 6 shall survive a
termination of the Agreement.
Section
6.12. Waiver of Trial by Jury. Each
Party hereby irrevocably and unconditionally waives the right to a
trial by jury in any action, suit, counterclaim or other proceeding
(whether based on contract, tort or otherwise) arising out of,
connected with or relating to this Agreement and the transactions
contemplated hereby.
Section
6.13. Remedies. The Company hereby
agrees that, in the event that the Company violates any provisions
of the Special Warrants (including the obligation to deliver
Special Warrant Shares upon the exchange and/or exercise thereof),
the remedies at law available to the Holder of such Special Warrant
may be inadequate. In such event, the Holder of such Special
Warrants, shall have the right, in addition to all other rights and
remedies it may have, to specific performance and/or injunctive or
other equitable relief to enforce the provisions of this Agreement
and the Special Warrants.
Section
6.14. Severability. In
the event that any provision contained in this Agreement, or the
application thereof in any circumstances, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any
such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired
thereby.
Section
6.15. Confidentiality. The Company
agrees that the Special Warrant Register and personal, non-public
warrantholder information, which are exchanged or received pursuant
to the negotiation or carrying out of this Agreement, shall remain
confidential and shall not be voluntarily disclosed to any other
Person, except as may be required by Law, including, without
limitation, pursuant to subpoenas from state or federal government
authorities (e.g., in divorce and criminal actions), or pursuant to
the Communications Laws, applicable state Laws or requirements of
the SEC.
[Signature
Page Follows]
IN
WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned Parties as of the date first above
written.
FUSION
CONNECT, INC.
Name:
Title:
HOLDERS:
ANNEX I
INFORMATION RELATING TO THE HOLDERS
|
Holder Name
|
|
|
Name in
Which Special Warrants to be Registered
|
|
|
Number
of Special Warrants
|
|
|
Address
for All Notices
|
|
|
Tax
Identification Number
|
|
EXHIBIT A
Form of Special Warrant
THE
SECURITIES REPRESENTED BY THIS SPECIAL WARRANT CERTIFICATE
(INCLUDING THE SECURITIES ISSUABLE UPON EXCHANGE AND/OR EXERCISE OF
THE SPECIAL WARRANT) ARE SUBJECT TO ADDITIONAL AGREEMENTS SET FORTH
IN THE SPECIAL WARRANT AGREEMENT DATED AS OF [●], 2019, BY
AND AMONG THE COMPANY AND THE HOLDERS NAMED THEREIN (THE
“SPECIAL WARRANT
AGREEMENT”).
THIS
SPECIAL WARRANT WILL BE VOID IF NOT EXERCISED PRIOR TO
5:00
P.M., NEW YORK CITY TIME, ON [●], 2039
SPECIAL WARRANT TO PURCHASE
[●] SHARES OF COMMON STOCK OF
ISSUE
DATE: [●], 2019
No.
W-[●]
This
certifies that, for value received, the undersigned and its
registered assigns (collectively, the “Registered Holder”), is entitled
to purchase from Fusion Connect, Inc., a Delaware corporation (the
“Company”),
subject to the terms and conditions hereof and in the Special
Warrant Agreement, at any time before 5:00 p.m., New York time, on
[●], 2039, the number of fully paid and non-assessable shares
of Common Stock of the Company set forth above at the Price (as
defined in the Special Warrant Agreement). The Price and the number
and kind of shares purchasable hereunder are subject to adjustment
from time to time as provided in Article 3 of the Special Warrant
Agreement. The initial Price shall be $0.01 per share of Common
Stock purchased hereunder.
This
Special Warrant Certificate shall not be valid unless countersigned
by the Holder hereof.
_____________________________________
IN
WITNESS WHEREOF, this Special Warrant has been duly executed by the
Company as of the [●]th day of [●], 2019.
FUSION
CONNECT, INC.
Print
Name:
Title:
[REGISTERED
HOLDER]
Print
Name:
Title:
Address
of Registered Holder for Notices (until changed in accordance with
the terms of the Special Warrant Agreement):
[●]
EXHIBIT B
Exercise Form
[To
Come]
EXHIBIT C
Ownership Certification
[To
come]
EXHIBIT D
FORM OF
ASSIGNMENT FOR REGISTERED HOLDERS OF SPECIAL
WARRANTS
(To be
executed only upon assignment of Special Warrants)
For
value received, the undersigned Holder of Special Warrants of
Fusion Connect, Inc. (the “Company”), issued pursuant to that
certain Special Warrant Agreement, dated as of [●], 2019 (the
“Special Warrant
Agreement”), by and between the Company and the
Special Warrantholders listed on Annex I thereto, hereby sells,
assigns and transfers unto the Assignee(s) named below the number
of Special Warrants listed opposite the respective name(s) of the
Assignee(s) named below, and all other rights of such Holder under
said Special Warrants, and does hereby irrevocably constitute and
appoint ____________ attorney, to transfer said Special Warrants,
as and to the extent set forth below, on the Special Warrant
Register maintained for the purpose of registration thereof, with
full power of substitution in the premises:
|
Name(s) of Assignee(s)
|
Address of Assignee(s)
|
Number ofSpecial Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
Dated:
__________, 20__
Note:
The above signature
and name should correspond exactly with the name of the Holder of
the Special Warrants as it appears on the Special Warrant
Register.
Exhibit D
Litigation Trust Agreement
LITIGATION TRUST AGREEMENT
This
Litigation Trust Agreement (the “Litigation Trust Agreement” or
this “Agreement”), dated as of [●,
2019] (the “Effective
Date”), by and among the Debtors (as defined below),
Neal P. Goldman, in his capacity as the trustee (the
“Original
Trustee”) and member of the Litigation Trust Oversight
Committee (as defined herein), the Non-Trustee Oversight Committee
Members (as defined herein) in their capacity as such, [insert
name], as Delaware resident trustee pursuant to Article 11 hereof
(the “Delaware
Trustee”), and the Creditors’ Committee (as
defined herein) is executed in order to establish a litigation
trust (the “Litigation
Trust”) in connection with the Global Settlement by
and among the Debtors, the Creditors’ Committee, the
Consenting First Lien Lenders, and the Consenting Second Lien
Lenders incorporated in, inter
alia, Section 5.2(b) of the Second Amended Joint Chapter 11 Plan of Fusion
Connect, Inc. and its Subsidiary Debtors (as amended, the
“Plan”) [ECF No.
455]. The “Debtors” as used herein shall mean
the debtors in the chapter 11 cases (the “Chapter 11 Cases”) pending in the
United States Bankruptcy Court for the Southern District of New
York (the “Bankruptcy
Court”) that are jointly administered as In re Fusion Connect, Inc., et al.,
Case No. 19-11811 (SMB), have principal offices located at 210
Interstate North Parkway, Suite 300, Atlanta, Georgia 30339 and are
Fusion Connect, Inc., Fusion BCHI Acquisition LLC, Fusion NBS
Acquisition Corp., Fusion LLC, Fusion MPHC Holding Corporation,
Fusion MPHC Group, Inc., Fusion Cloud Company LLC, Fusion Cloud
Services, LLC, Fusion CB Holdings, Inc., Fusion Communications,
LLC, Fusion Telecom, LLC, Fusion Texas Holdings, Inc., Fusion
Telecom of Kansas, LLC, Fusion Telecom of Oklahoma, LLC, Fusion
Telecom of Missouri, LLC, Fusion Telecom of Texas Ltd., L.L.P.,
Bircan Holdings, LLC, Fusion Management Services LLC and Fusion PM
Holdings, Inc. Capitalized terms used in this Litigation Trust
Agreement and not otherwise defined shall have the meanings
ascribed to them in the Plan.
WITNESSETH
WHEREAS, on June 3,
2019, each Debtor commenced the Chapter 11 Cases by filing a
petition for relief under chapter 11 of title 11 of the United
States Code (the “Bankruptcy
Code”) in the Bankruptcy Court;
WHEREAS, on June
18, 2019, the United States Trustee for the Southern District of
New York appointed an official committee of unsecured creditors (as
may be reconstituted from time to time, the “Creditors’ Committee”) in
the Chapter 11 Cases;
WHEREAS, on
[●], the Debtors filed the Plan;
WHEREAS, on
[●, 2019], the Debtors filed the Plan Supplement [ECF No.
●];
WHEREAS, on
[●, 2019], the Bankruptcy Court entered an order confirming
the Plan [ECF No. ●] (the “Confirmation Order”);
WHEREAS, the
Litigation Trust is created pursuant to, and to effectuate certain
provisions of the Plan, pursuant to which the Litigation Trust will
hold the Litigation Trust Assets;
WHEREAS, the
Litigation Trust is organized for the sole purpose of liquidating
the Litigation Trust Assets in an expeditious but orderly manner
for the benefit of the holders of Litigation Trust Interests and
Reorganized FCI (together, the “Litigation Trust Beneficiaries”),
including the investigation and prosecution of the Litigation Trust
Causes of Action, with no objective to continue or engage in the
conduct of a trade or business, except, to the extent reasonably
necessary to effectuate, and consistent with, the liquidating
purpose of the Litigation Trust;
WHEREAS, the
Litigation Trust is intended to be classified for U.S. federal
income tax purposes as a “liquidating trust” within the
meaning of Treasury Regulation Section 301.7701¬4(d) and thus
as a “grantor
trust” within the meaning of Sections 671 through 677
of the Internal Revenue Code of 1986, as amended (the
“IRC”), with the
Litigation Trust Beneficiaries treated for U.S. federal income tax
purposes as the grantors and owners of their respective shares of
the Litigation Trust Assets, subject to the Reorganized FCI
Distribution Rights (defined below) and other than with respect to
any assets allocable to, or retained on account of, Disputed
General Unsecured Claims; and
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained in this Litigation Trust
Agreement and in the Plan, Debtors or, from and after the Effective
Date, any successor thereto, by merger, consolidation, or otherwise
(the “ Reorganized
Debtors”), the Creditors’ Committee, the
Litigation Trustee, and the Non-Trustee Oversight Committee Members
agree as follows:
ARTICLE
1
ESTABLISHMENT
OF LITIGATION TRUST
1.1 Establishment of Litigation Trust;
Appointment of Original Trustee and Litigation Trust Oversight
Committee.
(a) Pursuant to the
Plan, the Debtors hereby establish a trust which shall be known as
the “Fusion Litigation
Trust” on behalf of the Litigation Trust Beneficiaries
in accordance with the Litigation Trust Agreement and the Plan. It
is the intention of the parties to this Agreement that the
Litigation Trust created hereby shall constitute a statutory trust
under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
§ 3801 et seq. (the “Delaware Statutory Trust Act”) and
that this Litigation Trust Agreement shall constitute the governing
instrument of the Litigation Trust. The Original Trustee and
Delaware Trustee are hereby authorized to execute and file a
certificate of trust with the Delaware Secretary of
State.
(b) The Original
Trustee is hereby appointed as trustee of the Litigation Trust and
agrees to accept and hold the Litigation Trust Assets in trust for
the Litigation Trust Beneficiaries subject to the terms of this
Litigation Trust Agreement, the Plan, and the Confirmation Order.
The Original Trustee and any successor trustee serving from time to
time duly appointed hereunder (the “Litigation Trustee”) shall have
all the rights, powers, and duties set forth herein.
(c) A committee created
and selected by the Debtors, the Creditors’ Committee and the
First Lien Lender Group (the “Litigation Trust Oversight
Committee”) is hereby appointed to oversee the
Litigation Trust and the activities of the Litigation Trustee. The
Litigation Trust Oversight Committee shall consist of three (3)
members and each successor member serving from time-to-time duly
appointed hereunder (each, a “Litigation Trust Oversight Committee
Member”), one of whom shall be the Litigation Trustee
and a majority of whom shall be “United States persons” within the
meaning of Section 7701(a)(30) of the IRC, and shall have all the
rights, powers, and duties set forth herein. The initial Litigation
Trust Oversight Committee Members are identified in Section 4.1
hereof.
1.2 Transfer of Assets and Rights to
Litigation Trustee.
(a) Pursuant to the
Plan, all of the Debtors’ right, title and interest in and to
the Litigation Trust Assets, including the Litigation Trust Debtor
Causes of Action, are automatically vested in the Litigation Trust
on the Effective Date, free and clear of all Liens, charges,
Claims, encumbrances, and interests, in accordance with Section
1141 of the Bankruptcy Code.
(b) Pursuant to the
Plan, all right, title and interest in the Litigation Trust First
Lien Lender Causes of Action held by holders of Allowed First Lien
Claims are automatically vested in the Litigation Trust on the
Effective Date, free and clear of all Liens, charges, Claims,
encumbrances, and interests, in accordance with Section 1141 of the
Bankruptcy Code.
(c) Pursuant to the
Plan, the Reorganized Debtors shall transfer to the Litigation
Trust the Litigation Trust Initial Funding on the Effective Date,
such Litigation Trust Initial Funding is automatically vested in
the Litigation Trust, free and clear of all Liens, charges, Claims,
encumbrances, and interests, in accordance with Section 1141 of the
Bankruptcy Code.
(d) Pursuant to the
Plan and the Litigation Trust Loan Agreement, upon the Litigation
Trust’s receipt of the Litigation Trust Loan Proceeds from
time to time, such Litigation Trust Loan Proceeds shall be added to
the Litigation Trust Assets and held as a part thereof (and title
thereto shall be vested in the Litigation Trust).
(e) All proceeds of
Litigation Trust Causes of Action recovered by the Litigation
Trust, whether recovered pursuant to the successful prosecution or
settlement of the Litigation Trust Causes of Action and all other
income earned with respect to the Litigation Trust Assets shall be
added to the Litigation Trust Assets and held as a part thereof
(and title thereto shall be vested in the Litigation
Trust).
(f) The Litigation
Trustee shall be the exclusive administrator of the assets of the
Litigation Trust for purposes of 31 U.S.C. § 3713(b) and 26
U.S.C. § 6012(b)(3), as well as the representatives of the
Estate of each of the Debtors appointed pursuant to Section
1123(b)(3)(B) of the Bankruptcy Code, solely for purposes of
carrying out the Litigation Trustee’s duties under the
Litigation Trust Agreement. On the Effective Date, the Litigation
Trust shall stand in the shoes of (i) the Debtors for all purposes
with respect to the Litigation Trust Assets (other with respect to
than the Litigation Trust First Lien Lender Causes of Action) and
the General Unsecured Claims reconciliation process, and (ii)
solely with respect to the Litigation Trust First Lien Lender
Causes of Action, the holders of Allowed First Lien
Claims.
(g) To the extent any
Litigation Trust Assets cannot be transferred to the Litigation
Trust because of a restriction on transferability under applicable
non-bankruptcy law that is not superseded or preempted by Section
1123 of the Bankruptcy Code or any provision of the Bankruptcy
Code, such Litigation Trust Assets shall be deemed to have been
retained by the Debtors and the Litigation Trustee shall be deemed
to have been designated as a representative of the Debtors pursuant
to Section 1123(b)(3)(B) of the Bankruptcy Code to enforce and
pursue such Litigation Trust Assets on behalf of the Debtors.
Notwithstanding the foregoing, all proceeds of such Litigation
Trust Assets shall be transferred to the Litigation Trust to be
distributed to the Litigation Trust Beneficiaries consistent with
the Plan and this Litigation Trust Agreement.
(h) The transfer of the
Litigation Trust Assets shall be exempt from any stamp, real estate
transfer, mortgage reporting, sales, use, or other tax, pursuant to
Section 1146(a) of the Bankruptcy Code.
(i) The Litigation
Trustee’s receipt of any documents or communications (whether
written or oral) shall not result in a waiver of any privileges
(including without limitation attorney-client privilege,
work-product privilege, or common interest privilege) and all such
privileges are preserved. The Litigation Trustee may waive any
privilege on behalf of the Litigation Trust or the Debtors, as
applicable, with respect to the Litigation Trust
Assets.
1.3 Title to Litigation Trust
Assets.
(a) Transfer of the
Litigation Trust Assets to the Litigation Trust shall be made for
the benefit of the Litigation Trust Beneficiaries to the extent
provided for under the Plan (including, for the sake of clarity,
being subject to Reorganized FCI’s retention of distribution
rights, as described in Sections 6.1(a) and 9.3 of this Agreement
and Section 5.2(b) of the Plan (the “Reorganized FCI Distribution
Rights”)). Upon the transfer of the Litigation Trust
Assets, the Litigation Trust shall succeed to all of the right,
title, and interest of the Debtors in and to the Litigation Trust
Assets and the Debtors and the Reorganized Debtors shall not have
any further interest in or with respect to the Litigation Trust
Assets or the Litigation Trust. Upon the transfer of the Litigation
Trust First Lien Lender Causes of Action, the Litigation Trust
shall succeed to all of the right, title, and interest of the
holders of Allowed First Lien Claims in such assets, and such
holders of Allowed First Lien Claims shall not have any further
interest in or with respect to such assets.
(b) For the sake of
clarity, notwithstanding anything to the contrary in this
Litigation Trust Agreement, all references to Litigation Trust
Assets, and the Litigation Trust Beneficiaries’ rights and
obligations with respect thereto, shall incorporate the fact they
are subject to the Reorganized FCI Distribution
Rights.
1.4 Nature and Purpose of Litigation
Trust.
(a) Purpose. The Litigation Trust
is organized and established as a trust, subject to the terms and
conditions contained herein and in the Plan for the sole purpose of
collecting, holding, administering, distributing and liquidating
the collective, holding, administering, distributing and
liquidating the Litigation Trust Assets in an expeditious but
orderly manner for the benefit of the Litigation Trust
Beneficiaries, including the investigation and prosecution of the
Litigation Trust Causes of Action, with no objective to continue or
engage in the conduct of a trade or business, except, to the extent
reasonably necessary to effectuate, and consistent with, the
liquidating purpose of the Litigation Trust.
(b) Actions of Litigation Trustee.
Subject to Section 3.6 hereof, the Litigation Trustee shall, in an
expeditious but orderly manner, liquidate and convert to cash the
Litigation Trust Assets, make timely distributions in accordance
with Article 6 of this Litigation Trust Agreement, and not unduly
prolong the duration of the Litigation Trust. The liquidation of
the Litigation Trust Assets may be accomplished through the
prosecution, compromise and settlement, abandonment, dismissal or
assignment of any or all claims, rights or causes of action, or
otherwise. As set forth in Article 8 herein, neither the Litigation
Trustee nor the Litigation Trust Oversight Committee or its members
shall have any liability for the outcome of any such decision
except for any damages caused by, respectively, either willful
misconduct, fraud, or knowing violation of law.
(c) Relationship. This Litigation
Trust Agreement is intended to create a trust and a trust
relationship and to be governed and construed in all respects as a
trust. The Litigation Trust is not intended to be, and shall not be
deemed to be or treated as, a general partnership, limited
partnership, joint venture, corporation, joint stock company or
association, nor shall the Litigation Trustee or the Litigation
Trust Beneficiaries, or any of them, for any purpose be, or be
deemed to be or treated in any way whatsoever to be, liable or
responsible hereunder as partners or joint ventures. The
relationship of the Litigation Trust Beneficiaries to the
Litigation Trust and the Litigation Trustee shall be solely that of
beneficiaries of a trust and shall not be deemed a principal or
agency relationship, and their rights shall be limited to those
conferred upon them by this Litigation Trust
Agreement.
1.5 Funding of the Litigation
Trust.
On the
Effective Date, Reorganized FCI, as lender, and the Litigation
Trust, as borrower, shall become parties to the Litigation Trust
Loan Agreement, pursuant to which the Reorganized FCI shall loan
the Litigation Trust Loan Proceeds to the Litigation Trust, subject
to the terms of the Litigation Trust Loan Agreement. The amount of
the Litigation Trust Loan may be increased post-Effective Date upon
the agreement of the Reorganized Debtors and the Litigation Trust,
subject to the terms of this Agreement. The Litigation Trust shall
be funded with the Litigation Trust Initial Funding, the Litigation
Trust Loan Proceeds and any proceeds of Litigation Trust Causes of
Action. Any failure or inability of the Litigation Trust to obtain
funding will not affect the enforceability of the Litigation
Trust.
1.6 Conflict.
To the
extent that there is a conflict between the provisions of the
Litigation Trust Agreement, the Plan, and the Confirmation Order,
the terms of the Confirmation Order shall control first, the terms
of the Plan shall control second, and the terms of the Litigation
Trust Agreement shall control third.
1.7 Appointment as
Representative.
Upon
the Effective Date, the Litigation Trustee is appointed as the duly
appointed representative of the Debtors and their estates with
respect to the Litigation Trust Assets, and, as such, upon such
appointment, the Litigation Trustee succeeds to all of the rights
and powers of a trustee in bankruptcy with respect to prosecution
of the Litigation Trust Assets for the benefit of the Litigation
Trust Beneficiaries.
1.8 Reservation of Rights Regarding
Litigation Trust Causes of Action.
No Entity may rely on the absence of a specific
reference in the Plan or the Plan Supplement to any Litigation
Trust Cause of Action against them as any indication that the
Litigation Trust will not pursue any and all available Litigation
Trust Causes of Action against them. The Litigation Trust expressly
reserves all rights to prosecute any and all Litigation Trust
Causes of Action against any Entity, except as otherwise provided
in the Plan or an order of the Bankruptcy Court. Unless a
specific Litigation Trust Cause of Action against an Entity is
expressly waived, relinquished, exculpated, released, compromised,
or settled in the Plan or an order of the Bankruptcy Court, the
Litigation Trust expressly reserves such Litigation Trust Causes of
Action for later adjudication. For the avoidance of doubt, the
Litigation Trust Assets do not include Causes of Action against any
Released Parties that are released under the Plan.
ARTICLE
2
LITIGATION
TRUST INTERESTS
2.1 Beneficial Interests in the Litigation
Trust Assets.
The
allocation and distribution of beneficial interests in the
Litigation Trust Assets shall be accomplished as set forth in the
Plan.
2.2 Interests Beneficial
Only.
The
ownership of a beneficial interest in the Litigation Trust Assets
shall not entitle any such holder to any title in or to the assets
of the Litigation Trust as such (which title shall be vested in the
Litigation Trust pursuant to Section 1.2 hereof) or to any right to
call for a partition or division of the assets of the Litigation
Trust or to require an accounting.
2.3 No Right to
Accounting.
None of
the Litigation Trust Beneficiaries, their successors, assigns or
creditors, or any other Entity shall have any right to an
accounting by the Litigation Trust or Litigation Trustee, and the
Litigation Trustee shall not be obligated to provide any accounting
to any Entity. Nothing in this Agreement is intended to require the
Litigation Trustee at any time or for any purpose to file any
accounting or seek approval of any court with respect to the
administration of the Litigation Trust or as a condition for making
any advance, payment or distribution out of the Litigation Trust
Proceeds.
2.4 No Standing.
A
Litigation Trust Beneficiary shall not have standing to direct or
to seek to direct the Litigation Trust or Litigation Trustee to do
or not to do any act or to institute any action or proceeding at
law or in equity against any person upon or with respect to the
Litigation Trust Assets.
2.5 Evidence of Beneficial
Interest.
Ownership of a
Litigation Trust Interest shall not be evidenced by any
certificate, security, or receipt or in any other form or manner
whatsoever, except as maintained on the books and records of the
Litigation Trust by the Litigation Trustee.
2.6 Securities Law
Registration.
It is
intended that the Litigation Trust Interests shall not constitute
“securities” and
none of the Litigation Trust Interests shall be certificated. If
the Litigation Trustee determines, with the advice of counsel, that
the Litigation Trust is required to comply with registration and
reporting requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), or the Investment Company Act of 1940, as
amended (the “Investment
Company Act”), then the Litigation Trustee shall take
any and all actions to comply with such registration and reporting
requirements, if any, and file periodic reports with the Securities
and Exchange Commission (the “SEC”). Notwithstanding the
foregoing procedure, nothing herein shall be deemed to preclude the
Litigation Trustee from amending this Litigation Trust Agreement to
make such changes as are deemed necessary or appropriate by the
Litigation Trustee, with the advice of counsel, to ensure that the
Litigation Trust is not subject to registration or reporting
requirements of the Exchange Act, or the Investment Company
Act.
ARTICLE
3
LITIGATION
TRUSTEE
3.1 Funding and Payment of Litigation
Trust Expenses.
(a) The Litigation
Trustee may, in his or her discretion, in consultation with the
Litigation Trust Oversight Committee, maintain a litigation expense
fund from the Litigation Trust Assets (the “Litigation Trust Expense Fund”) in
an amount as is reasonably necessary to pay the Litigation Trust
Expenses incurred or expected to be incurred. The amounts held in
the Litigation Trust Expense Fund may be subject to periodic review
by the Litigation Trust Oversight Committee upon request from any
of the Litigation Trust Oversight Committee Members. For the
avoidance of doubt, the Reorganized Debtors shall not be
responsible for any costs, fees, or expenses of the Litigation
Trust.
(b) From and after the
Effective Date, payment of the Litigation Trust Expenses shall be
deemed to be made (i) first, from the Litigation Trust Initial
Funding until such funds are depleted, (ii) second, from the
Litigation Trust Loan Proceeds until such funds are depleted, and
(iii) third, from the Litigation Trust Proceeds (if any), subject
in all respects to any procedures and approvals later established
by the Litigation Trust Oversight Committee (the
“Approval
Procedures”). For the avoidance of doubt, however, the
Litigation Trust shall be prohibited from using any Litigation
Trust Loan Proceeds until no portion of the Litigation Trust
Initial Funding is remaining.
3.2 Distributions to Litigation Trust
Beneficiaries.
The
Litigation Trustee shall distribute the net distributable assets of
the Litigation Trust to the Litigation Trust Beneficiaries in
accordance with the provisions of Article 6 hereof and the
Plan.
3.3 Tenure, Removal, and Replacement of
Litigation Trustee.
(a) The Litigation
Trustee shall serve until (i) resignation and the appointment of a
successor pursuant to subsection (b) below, (ii) removal pursuant
to subsection (c) below, or (iii) death.
(b) The Litigation
Trustee may resign by giving not less than sixty (60) days’
prior written notice to the members of the Litigation Trust
Oversight Committee other than the Litigation Trustee (the
“Non-Trustee Oversight
Committee Members”). Such resignation shall become
effective on the later to occur of: (i) the day specified in such
notice and (ii) the appointment of a successor Litigation Trustee
as provided herein and the acceptance by such successor of the
appointment. If a successor Litigation Trustee is not appointed
pursuant to this Agreement or does not accept the appointment
within sixty (60) days following delivery of notice of resignation,
any Non-Trustee Oversight Committee Member may file a motion with
the Bankruptcy Court, upon notice and hearing, for the appointment
of a successor Litigation Trustee.
(c) The Litigation
Trustee may be removed for Cause (as defined in Section 4.8(c)
hereof), by the unanimous affirmative vote of both Non-Trustee
Oversight Committee Members (which votes may be obtained in writing
or at a meeting called for the purpose of removing the Litigation
Trustee). Such removal shall become effective on the date notice of
the votes to remove the Litigation Trustee is received by the
Litigation Trustee.
(d) In the event of the
death, resignation pursuant to Section 3.3(b) hereof, or removal of
the Litigation Trustee pursuant to Section 3.3(c) hereof, the
Non-Trustee Oversight Committee Members may appoint a successor
Litigation Trustee, [subject to the requirement that any successor
Litigation Trustee be a “United States person” within the
meaning of Section 7701(a)(30) of the IRC]. Such appointment shall
specify the date on which such appointment shall be effective. In
the event the Non-Trustee Oversight Committee Members cannot agree
on a replacement Litigation Trustee within 60-days of the
Litigation Trustee’s death, resignation, or removal, either
Non-Trustee Oversight Committee Member may seek appointment of a
replacement Litigation Trustee upon a motion before the Bankruptcy
Court.
(e) Immediately upon
the appointment of any successor Litigation Trustee, all rights,
powers, duties, authority, and privileges of the predecessor
Litigation Trustee under this Agreement and the Plan shall be
vested in and undertaken by the successor Litigation Trustee
without any further act. The successor Litigation Trustee shall not
be responsible for any act or omission of the predecessor
Litigation Trustee.
(f) Upon the
appointment of a successor Litigation Trustee, the predecessor
Litigation Trustee (or the duly appointed legal representative of a
deceased Litigation Trustee) shall, if applicable, when requested
in writing by the successor Litigation Trustee, execute and deliver
an instrument or instruments conveying and transferring to such
successor trustee upon the trust herein expressed, without recourse
to the predecessor Litigation Trustee, all the estates, properties,
rights, powers and trusts of such predecessor Litigation Trustee,
and shall duly assign, transfer, and deliver to such successor
Litigation Trustee all property and money held hereunder, and all
other assets and documents relating to the Litigation Trust, the
Litigation Trust Assets, or the Litigation Trust Interests then in
his or her possession and held hereunder.
(g) The appointment of
a successor Litigation Trustee will be evidenced by the filing with
the Bankruptcy Court of a notice of appointment, which notice will
include the name, address, and telephone number of the successor
Litigation Trustee.
3.4 Acceptance of Appointment by Successor
Litigation Trustee.
Any
successor Litigation Trustee appointed hereunder shall execute an
instrument accepting such appointment and assuming all of the
obligations of the predecessor Litigation Trustee hereunder and
thereupon the successor Litigation Trustee shall, without any
further act, become vested with all the estates, properties,
rights, powers, trusts, and duties of its predecessor in the
Litigation Trust hereunder with like effect as if originally named
herein.
3.5 Role of the Litigation
Trustee.
In
furtherance of and consistent with the purpose of the Litigation
Trust, the Litigation Trustee shall have the power to (i)
prosecute, compromise and settle, abandon, assign, or dismiss for
the benefit of the Litigation Trust Beneficiaries all claims,
rights, and causes of action transferred to the Litigation Trust
(whether such suits are brought in the name of the Litigation
Trustee or otherwise), and (ii) otherwise perform the functions and
take the actions provided or permitted in this Litigation Trust
Agreement, subject to the terms and conditions contained herein. In
all circumstances, the Litigation Trustee shall act in the best
interests of all the Litigation Trust Beneficiaries and in
furtherance of the purpose of the Litigation Trust.
3.6 Authority of Litigation
Trustee.
Subject
to any limitations contained herein (including but not limited to
the Section 4.2 hereof), in the Plan, or the Confirmation Order,
the Litigation Trustee shall have the following powers and
authorities on behalf of the Litigation Trust:
(a) hold legal title to
any and all rights of the holders of the Litigation Trust Interests
in or arising from the Litigation Trust Assets, including, without
limitation, collecting and receiving any and all money and other
property belonging to the Litigation Trust and the right to vote
any claim or interest relating to a Litigation Trust Asset in a
case under the Bankruptcy Code and receive any distribution
thereon;
(b) investigate,
commence, prosecute, abandon, or settle the Litigation Trust Causes
of Action, and enforce contracts or assert claims, defenses,
offsets and privileges, but only as such duties and powers relate
to the Litigation Trust Assets; provided, however, that the
Litigation Trust Oversight Committee must approve, by a majority
vote, the prosecution, compromise and settlement, abandonment,
dismissal, or assignment of any Litigation Trust Asset where the
stated face amount in controversy exceeds $500,000;
(c) without the need
for Bankruptcy Court approval (unless otherwise indicated), to,
except to the extent Claims have been Allowed, investigate, object
to, subordinate, compromise, estimate, allow, or settle any and all
General Unsecured Claims against the Debtors;
(d) protect and enforce
the rights to the Litigation Trust Assets by any method deemed
appropriate including, without limitation, by judicial proceedings
or pursuant to any applicable bankruptcy, insolvency, moratorium or
similar law and general principles of equity;
(e) obtain reasonable
insurance coverage with respect to the liabilities and obligations
of the Litigation Trustee and the Litigation Trust Oversight
Committee under this Litigation Trust Agreement (in the form of an
errors and omissions policy or otherwise), if the Litigation
Trustee determines that such insurance coverage is appropriate,
subject to approval by the Litigation Trust Oversight
Committee;
(f) obtain insurance
coverage with respect to real and personal property that may become
assets of the Litigation Trust, if any, if the Litigation Trustee
determines in good faith that such insurance coverage is
appropriate;
(g) retain, without
Bankruptcy Court approval, and pay out of the Litigation Trust
Expense Fund, reasonable compensation for services rendered and
reasonable and documented out-of-pocket expenses incurred pursuant
to the Approval Procedures by such counsel, advisors,
professionals, or other third-parties to assist with the
administration of the Litigation Trust;1 provided, however, that such retentions
and payments are approved by the Litigation Trust Oversight
Committee;
(h) subject to Section
1.2(i) hereof, assert or waive any privilege or any defense on
behalf of the Litigation Trust, the Debtors, or, solely with
respect to the First Lien Lender Cause of Action, holders of
Allowed First Lien Claims, as applicable, with respect to the
Litigation Trust Assets;
(i) enter into the
Litigation Trust Loan Agreement;
(j) with the approval
of the Litigation Trust Oversight Committee, negotiate and execute
any agreement or amendment to the Litigation Trust Loan Agreement
to increase the amount of the Litigation Trust Loan;
(k) open and maintain
bank and other deposit accounts, escrows and other accounts,
calculate and implement distributions to the Litigation Trust
Beneficiaries as provided for or contemplated by the Plan, and take
other actions consistent with the Plan and the implementation
thereof, including the establishment, re-evaluation, adjustment and
maintenance of appropriate reserves (including, but not limited to,
the Litigation Trust Expense Fund);
(l) establish and
maintain a reserve for Disputed General Unsecured Claims in
accordance with the Plan (the “Disputed GUC
Reserve”);
(m) for U.S. federal
income tax purposes (and, to the extent permitted by law, for state
and local income tax purposes), (i) make an election pursuant to
United States Treasury Regulation section 1.468B-9 to treat the
Disputed GUC Reserve as a “disputed ownership fund” within
the meaning of that section, (ii) allocate taxable income or loss
to the Disputed GUC Reserve with respect to any given taxable year
(but only for the portion of the taxable year with respect to which
such Claims are Disputed General Unsecured Claims), and (iii)
distribute assets from the Disputed GUC Reserve as, when, and to
the extent, such Disputed General Unsecured Claims either become
Allowed or are otherwise resolved;
(n) upon the approval
of the Litigation Trust Oversight Committee, invest the Litigation
Trust Assets in accordance with Section 3.14 hereof, incur
obligations for reasonable and necessary expenses in liquidating
and converting the Litigation Trust Assets to Cash, and pay taxes
and other obligations owed by the Litigation Trust; provided,
however, that such actions are consistent with the Litigation
Trust’s status as a liquidating trust within the meaning of
United States Treasury Regulation section 301.7701-
4(d).
(o) examine any Entity,
pursuant to the provisions of the Federal Rules of Evidence, the
Federal Rules of Bankruptcy Procedure, or any other applicable law
or rule, including to issue subpoenas for documents and testimony
in connection with the Litigation Trust Causes of Action under
Bankruptcy Rule 2004;
(p) take or refrain
from taking any and all other actions that the Litigation Trustee,
reasonably deems necessary or convenient for the continuation,
protection and maximization of the Litigation Trust Assets or to
carry out the purposes hereof; and
(q) make distributions
to the Litigation Trust Beneficiaries in accordance with Article 6
hereof.
(r) exercise all other
powers and authorities of the Litigation Trustee provided for under
the Plan and this Agreement.
______________________________________
3.7 Limitation of Litigation
Trustee’s Authority.
The
Litigation Trustee shall, on behalf of the Litigation Trust, hold
the Litigation Trust out as a trust in the process of liquidation
and not as an investment company. Notwithstanding anything herein
to the contrary, the Litigation Trustee shall not (i) be authorized
to engage in any trade or business, (ii) take such actions
inconsistent with the orderly liquidation of the assets of the
Litigation Trust as are required or contemplated by applicable law,
the Plan, the Confirmation Order, and this Litigation Trust
Agreement, or (iii) be authorized to engage in any investments or
activities inconsistent with the treatment of the Litigation Trust
as a liquidating trust within the meaning of Treasury Regulation
Section 301.7701-4(d) and in accordance with Rev. Proc. 94-45,
1994-2 C.B. 684.
3.8 Cooperation of the Reorganized
Debtors.
The
Reorganized Debtors shall reasonably cooperate with the Litigation
Trust, the Litigation Trustee, the Litigation Trust Oversight
Committee, and their agents and representatives in the
administration of the Litigation Trust, including, providing
reasonable access to books and records and current employees and
officers, including for interviews, deposition, or testimony, with
respect to (i) the investigation, prosecution, compromise, and/or
settlement of the Litigation Trust Causes of Action, (ii)
contesting, settling, compromising, reconciling, and objecting to
General Unsecured Claims, and (iii) administering the Litigation
Trust (collectively, the “Trust Responsibilities”) and in
each case, the Litigation Trust shall reimburse reasonable
out-of-pocket expenses incurred in connection with such
cooperation. The Reorganized Debtors shall take all reasonable
efforts to assist the Litigation Trust with the Trust
Responsibilities and the Litigation Trust may enter into agreements
with the Reorganized Debtors and/or the Creditors’ Committee
in order to obtain information from the Reorganized Debtors and/or
the Creditors’ Committee on a confidential basis, without
being restricted by or waiving any applicable work product,
attorney-client, or other privilege. The Litigation Trust’s
receipt of documents, information, or communications from the
Reorganized Debtors shall not constitute a waiver of any privilege.
For the avoidance of doubt, the Litigation Trust shall not be
responsible for legal fees, if any, incurred by the Reorganized
Debtors in fulfilling its obligations under this
Section.
3.9 Books and Records.
On or
promptly after the Effective Date, the Reorganized Debtors shall
transfer or make available to the Litigation Trust copies of all of
the Debtors’ books and records and all other documents, data,
and communications related to the Litigation Causes of Action and
General Unsecured Claims, including those maintained in electronic
format and original documents (collectively, the
“Subject Books and
Records”). The Litigation Trustee shall not use any of
the Subject Books and Records for any purpose other than to fulfill
its duties under the Plan and this Litigation Trust Agreement. In
addition, to the extent not prohibited by applicable law, the
Reorganized Debtors shall provide or cause to be provided to the
Litigation Trustee a general, summary description of the Subject
Books and Records that the Reorganized Debtors are turning over to
the Litigation Trustee, and any existing index
thereof.
3.10 Inquiries
into Litigation Trustee’s Authority.
Except
as otherwise set forth in the Litigation Trust Agreement, no Entity
dealing with the Litigation Trust shall be obligated to inquire
into the authority of the Litigation Trustee in connection with the
protection, conservation, or disposition of the Litigation Trust
Assets.
3.11 Compliance
with Laws.
Any and
all distributions of assets of the Litigation Trust and proceeds of
borrowings, if any, shall be in compliance with applicable laws,
including, without limitation, applicable federal and state
securities laws.
3.12 Compensation
of Litigation Trustee.
The
Litigation Trustee shall be reimbursed for reasonable costs and
expenses incurred in accordance with his or her duties and
compensated in accordance with the compensation schedule attached
hereto as Exhibit A (the “Trustee Compensation Schedule”),
subject to the approval of the Bankruptcy Court prior to the entry
of the Confirmation Order. The terms of the Litigation
Trustee’s engagement shall include a monthly compensation
arrangement and a contingent compensation arrangement for
Litigation Trust Proceeds collected in accordance with the terms of
the Trustee Compensation Schedule.
3.13 Reliance
by Litigation Trustee.
(a) The Litigation
Trustee may rely, and shall be protected in acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, or other paper or document
believed by the Litigation Trustee to be genuine and to have been
signed or presented by the proper party or parties;
and
(b) Entities dealing
with the Litigation Trustee shall look only to the Litigation Trust
Assets to satisfy any liability incurred by the Litigation Trust or
the Litigation Trustee to such Entities in carrying out the terms
of this Litigation Trust Agreement, and the Litigation Trustee
shall not have any personal obligation to satisfy any such
liability.
3.14 Investment
and Safekeeping of Litigation Trust Assets.
The
Litigation Trustee may invest all Litigation Trust Assets only in
cash, cash equivalents, U.S. Treasury securities, money market
investments, and similar investments; provided, however, that the
scope of any such permissible investments shall be limited to
include only those investments, or shall be expanded to include any
additional investments, as the case may be, that a liquidating
trust within the meaning of Treasury Regulation Section
301.7701-4(d) may be permitted to hold, pursuant to the Treasury
Regulations, or any modification in the guidelines of the IRS,
whether set forth in IRS rulings, other IRS pronouncements or
otherwise.
ARTICLE
4
LITIGATION
TRUST OVERSIGHT COMMITTEE
4.1 Litigation Trust Oversight
Committee.
There
shall be a three-member Litigation Trust Oversight Committee, which
shall consist of (i) two (2) Non-Trustee Oversight Committee
Members and (ii) the Litigation Trustee. On the Effective Date, the
Litigation Trust Oversight Committee shall become effective and
shall consist of (i) the Original Trustee, (ii) [] (together with
any successor, the “First
Lien Lender Designee”), a designee appointed by the
First Lien Lender Group, and (iii) [____] (together with any
successor, the “UCC
Designee”), a designee appointed by the
Creditors’ Committee. Upon appointment, the Litigation Trust
Oversight Committee and its members shall have the rights, powers,
and duties described herein and shall have such other rights to
operate and manage the Litigation Trust as are not inconsistent
with the terms of this Litigation Trust Agreement or the Plan. For
the avoidance of doubt, the Litigation Trustee shall be a voting
member of the Litigation Trust Oversight Committee.
4.2 Authority of Litigation Trust
Oversight Committee.
The
Litigation Trust Oversight Committee shall have the authority and
responsibility to (i) oversee, review, and guide the activities and
performance of the Litigation Trustee, (ii) approve, by a majority
vote, the prosecution, compromise and settlement, abandonment,
dismissal, or assignment of any Litigation Trust Asset where the
stated face amount in controversy exceeds $500,000; (iii) approve,
by a majority vote, the Litigation Trust’s retention of any
professionals or service providers; (iv) remove, by a unanimous
vote of the Non-Trustee Oversight Committee Members, the Litigation
Trustee in accordance with the provisions of Section 3.3(c) hereof;
(v) adjust, by a majority vote, the minimum threshold value
referenced in clause (ii) above; (vi) review and adjust, by a
majority vote, the amount held in the Litigation Trust Expense Fund
and approve, by a majority vote, any payment above any threshold
determined by the Litigation Trust Oversight Committee made from
the Litigation Trust Expense Fund or otherwise to pay the
Litigation Trust Expenses; (vii) approve, by a majority vote, any
agreement or amendment to the Litigation Trust Loan Agreement to
increase the amount of the Litigation Trust Loan; (viii) exercise,
by a majority vote and in accordance with Article 9 hereof, the
Termination Right; (ix) subject to Section 4.8 hereof, fill any
Non-Trustee Oversight Board Member vacancy on the Litigation Trust
Oversight Committee; and (x) exercise the other rights, powers, and
duties of the Litigation Trust Oversight Committee described in
this Litigation Trust Agreement. The Litigation Trustee shall
consult with and provide information to the Litigation Trust
Oversight Committee in accordance with and pursuant to the terms of
this Litigation Trust Agreement, the Plan, and the Confirmation
Order.
4.3 Regular Meetings of Litigation Trustee
and Litigation Trust Oversight Committee.
Meetings of the
Litigation Trust Oversight Committee are to be held with such
frequency and at such place as the Litigation Trust Oversight
Committee may determine in its sole discretion. For the avoidance
of doubt, such meetings may be held telephonically.
4.4 Special Meetings of Litigation Trustee
and Litigation Trust Oversight Committee.
Special
meetings of the Litigation Trust Oversight Committee may be held
whenever and wherever called for by the Litigation Trustee or at
least two (2) members of the Litigation Trust Oversight
Committee.
4.5 Notice of, and Waiver of Notice for,
Litigation Trustee and Litigation Trust Oversight
Committee.
Notice
of the time and place (but not necessarily the purpose or all of
the purposes) of any regular or special meeting shall be given to
the members of the Litigation Trust Oversight Committee in person
or by telephone, or via email or electronic mail. Notice to the
members of the Litigation Trust Oversight Committee of any such
special meeting shall be deemed given sufficiently in advance when
(i) if given by mail, the same is deposited in the United States
mail at least ten (10) calendar days before the meeting date, with
postage thereon prepaid, (ii) if given by electronic mail, the same
is transmitted at least three (3) Business Days prior to the
convening of the meeting (to the extent reasonably possible), or
(iii) if personally delivered (including by overnight courier) or
given by telephone, the same is handed, or the substance thereof is
communicated over the telephone to the members of the Litigation
Trust Oversight Committee or to an adult member of his/her office
staff or household, at least one (1) Business Day prior to the
convening of the meeting. Any member of the Litigation Trust
Oversight Committee may waive notice of any meeting and any
adjournment thereof at any time before, during, or after it is
held. Except as provided in the next sentence below, the waiver
must be in writing and retained with the records of the Litigation
Trust. The attendance of the Litigation Trustee or a member of the
Litigation Trust Oversight Committee at a meeting shall constitute
a waiver of notice of such meeting, except when the person attends
a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
4.6 Manner of Acting.
(a) A majority of the
total number of members of the Litigation Trust Oversight Committee
then in office, which, prior to the Exercise of the UCC Option,
must include both the First Lien Lender Designee and the UCC
Designee, shall constitute a quorum for the transaction of business
at any meeting of the Litigation Trust Oversight Committee. The
affirmative vote of a majority of the members of the Litigation
Trust Oversight Committee present and entitled to vote at a meeting
at which a quorum is present shall be the act of the Litigation
Trust Oversight Committee except as provided in this Litigation
Trust Oversight Committee. In the event that a vote of the
Litigation Trust Oversight Committee taken at a meeting at which a
quorum is present results in a tie, the vote of the Litigation
Trustee shall determine whether the proposed action is approved by
the Litigation Trust Oversight Committee. The Litigation Trust
Oversight Committee may take action by written consent and votes
may be provided by electronic mail.
(b) Any or all of the
members of the Litigation Trust Oversight Committee may participate
in a regular or special meeting by, or conduct the meeting through
the use of, conference telephone or similar communications
equipment by means of which persons participating in the meeting
may hear each other, in which case any required notice of such
meeting may generally describe the arrangements (rather than or in
addition to the place) for the holding thereof. The Litigation
Trustee or any member of the Litigation Trust Oversight Committee
participating in a meeting by this means is deemed to be present in
person at the meeting. Voting may be conducted by electronic mail
or individual communications.
(c) Any member of the
Litigation Trust Oversight Committee who is present and entitled to
vote at a meeting of the Litigation Trust Oversight Committee when
action is taken is deemed to have assented to the action taken,
subject to the requisite vote of the Litigation Trust Oversight
Committee unless: (i) such member of the Litigation Trust Oversight
Committee objects at the beginning of the meeting (or promptly upon
his/her arrival) to holding it or transacting business at the
meeting; or (ii) he/she delivers written notice (including by
electronic transmission) of his/her dissent or abstention to the
Litigation Trust Oversight Committee before the meeting takes
place. The right of dissent or abstention is not available to any
member of the Litigation Trust Oversight Committee who votes in
favor of the action taken.
(d) Prior to the taking
of a vote on any matter or issue or the taking of any action with
respect to any matter or issue, each member of the Litigation Trust
Oversight Committee shall report to the Litigation Trust Oversight
Committee any conflict of interest such member has or may have with
respect to the matter or issue at hand and fully disclose the
nature of such conflict or potential conflict (including, without
limitation, disclosing any and all financial or other pecuniary
interests that such member might have with respect to or in
connection with such matter or issue), other than in their capacity
as a member of the First Lien Lender Group or holder of Litigation
Trust Interests. A member who has or who may have a conflict of
interest shall be deemed to be a “conflicted member” who shall not
be entitled to vote or take part in any action with respect to such
matter or issue (however such member shall be counted for purposes
of determining the existence of a quorum); the vote or action with
respect to such matter or issue shall be undertaken only by members
of the Litigation Trust Oversight Committee who are not
“conflicted
members.” For the avoidance of doubt, the First Lien
Lender Designee shall not be a “conflicted member” by virtue of
any current or former connection with the Reorganized Debtors or
First Lien Lender Group and the UCC Designee shall not be a
“conflicted
member” by virtue of (i) any current or former
connection with the Creditors’ Committee or (ii) being a
current, former, or potential holder of Litigation Trust
Interests.
4.7 Litigation Trust Oversight
Committee’s Action without a Meeting.
Any
action required or permitted to be taken by the Litigation Trust
Oversight Committee at a meeting may be taken without a meeting if
the action is taken by unanimous written consent of the Litigation
Trust Oversight Committee as evidenced by one or more written
consents describing the action taken, signed or acknowledged via
e-mail by all members of the Litigation Trust Oversight Committee
and recorded in the minutes or other transcript of proceedings of
the Litigation Trust Oversight Committee and the required notice of
meeting has been given in accordance with Section 4.5
hereof.
4.8 Tenure, Removal, and Replacement of
Non-Trustee Oversight Committee Members.
The
authority of the Non-Trustee Oversight Committee Members shall be
effective as of the Effective Date and shall remain and continue in
full force and effect until the Litigation Trust is terminated in
accordance with Article 9 hereof. The service of the Non-Trustee
Oversight Committee Members shall be subject to the
following:
(a) The Non-Trustee
Oversight Committee Members will serve until (i) death, (ii)
resignation pursuant to subsection (b) below (iii) or removal
pursuant to subsection (c) below.
(b) A Non-Trustee
Oversight Committee Member may resign at any time by providing a
written notice of resignation to the remaining members of the
Litigation Trust Oversight Committee. Any Non-Trustee Oversight
Committee Member who resigns shall continue to serve until the
earlier of (i) the appointment of his or her successor; and (ii)
ninety (90) days after the delivery of such written
notice.
(c) A Non-Trustee
Oversight Committee Member may be removed by the majority vote of
the other members of the Litigation Trust Oversight Committee,
written resolution of which shall be delivered to the removed
member; provided, however, that such removal may only be made for
Cause. For purposes of this Section 4.8(c), “Cause” shall be defined as: (i)
such member’s theft or embezzlement or attempted theft or
embezzlement of money or tangible or intangible assets or property;
(ii) such member’s violation of any law (whether foreign or
domestic), which results in a felony indictment or similar judicial
proceeding; (iii) such member’s willful misconduct, fraud, or
knowing violation of law in the performance of his or her duties;
or (iv) such member’s failure to perform any of his or her
other material duties under this Litigation Trust Agreement
(including the regular attendance at meetings); provided, however,
that such Litigation Trust Oversight Committee member shall have
been given a reasonable period to cure any alleged cause under
clause (iii) (other than willful misconduct, fraud, or violation of
law that results in an indictment or similar judicial proceeding)
or clause (iv).
(d) In the event of a
vacancy on the Litigation Trust Oversight Committee due to the
removal or death of a Non-Trustee Oversight Committee Member, a new
member may be appointed to fill such position by the Litigation
Trustee.
(e) In the event of a
vacancy on the Litigation Trust Oversight Committee due to the
resignation of a Non-Trustee Oversight Committee Member, a new
member may be appointed to fill such position by the resigning
Non-Trustee Oversight Committee Member. A Non-Trustee Oversight
Committee Member who resigns shall take reasonable efforts to
appoint a replacement. In the event resigning Non-Trustee Oversight
Committee Member is unable to appoint a replacement, the Litigation
Trustee may appoint a replacement.
(f) In the event that
there are no remaining members of the Litigation Trust Oversight
Committee, the appointments to fill such vacancies that would have
been made by the remaining members of the Litigation Trust
Oversight Committee shall be made upon an order entered after an
opportunity for a hearing by the Bankruptcy Court, upon motion of
the Litigation Trustee.
(g) Immediately upon
the appointment of any successor member of the Litigation Trust
Oversight Committee, all rights, powers, duties, authority, and
privileges of the predecessor member of the Litigation Trust
Oversight Committee under this Agreement and the Plan shall be
vested in and undertaken by the successor member of the Litigation
Trust Oversight Committee without any further act. In addition, the
successor member of the Litigation Trust Oversight Committee shall
not be responsible for any act or omission of the predecessor
member of the Litigation Trust Oversight Committee. Any successor
member of the Litigation Trust Oversight Committee appointed
hereunder shall execute an instrument accepting such appointment
and assuming all of the obligations set forth herein.
(h) The appointment of
a successor member of the Litigation Trust Oversight Committee
shall be evidenced by the filing with the Bankruptcy Court of a
notice of appointment, which notice shall include the name,
address, and telephone number of the successor member of the
Litigation Trust Oversight Committee.
4.9 Reimbursement for Expenses of
Litigation Trust Oversight Committee.
Each
Non-Trustee Oversight Committee Member of the Litigation Trust
Oversight Committee shall be entitled to receive reimbursement by
the Litigation Trust for any reasonable, out-of-pocket expenses
incurred by such member in fulfilling his/her duties hereunder. For
the avoidance of doubt, the Non-Trustee Oversight Committee Members
shall not be entitled to (i) reimbursement of expenses incurred
relating to their own attorneys or professionals or (ii)
compensation for the performance of such member’s duties
hereunder.
4.10 Limitation
of Litigation Trust Oversight Committee’s
Authority.
Notwithstanding
anything herein to the contrary, the Litigation Trust Oversight
Committee Members shall not (i) be authorized to engaged in any
trade or business; (ii) take any action inconsistent with the
orderly liquidation of the assets of the Litigation Trust as is
required or contemplated by applicable law, this Litigation Trust
Agreement, the Confirmation Order, or the Plan; or (iii) be
authorized to engage in any investments or activities inconsistent
with the treatment of the Litigation Trust as a liquidating trust
within the meaning of Treasury Regulation Section 301.7701-4(d) and
in accordance with Rev. Proc. 94-45, 1994-2 C.B. 684.
ARTICLE
5
TAX
MATTERS
5.1 Tax Reporting.
(a) Subject to
definitive guidance from the IRS or a court of competent
jurisdiction to the contrary (including receipt by the Litigation
Trustee of a private letter ruling if the Litigation Trust
Oversight Committee so requests one, or the receipt of an adverse
determination by the IRS upon audit if not contested by the
Litigation Trustee) and Section 5.1, the Litigation Trust shall be
treated as a “liquidating
trust” within the meaning of Treasury Regulation
Section 301.7701-4(d) and thus as a “grantor trust” within the meaning
of Sections 671 through 679 of the IRC, and all parties to the
Litigation Trust (including, without limitation, the Litigation
Trustee, the Debtors, the Reorganized Debtors, and the Litigation
Trust Beneficiaries) shall report consistently therewith for U.S.
federal income tax purposes. Accordingly, for U.S. federal income
tax purposes, the Litigation Trust Assets shall be treated by all
parties as (i) having been distributed (subject to any obligations
relating to such assets) by the Debtors to the Litigation Trust
Beneficiaries (other than any assets allocable to the Disputed GUC
Reserve) pursuant to the Plan. Accordingly, the Litigation Trust
Beneficiaries shall be treated for U.S. federal income tax purposes
as the grantors and owners of their respective share of the
Litigation Trust Assets (other than such Litigation Trust Assets
that are allocable to the Disputed GUC Reserve). The foregoing
treatment shall also apply, to the extent permitted by applicable
law, for state and local tax purposes.
(b) As soon as
practicable after the Effective Date, (i) the Litigation Trustee
shall determine the fair market value as of the Effective Date of
all Litigation Trust Assets, and such determined fair market value
shall be used consistently by all parties to the Litigation Trust
Agreement for all U.S. federal income tax purposes, and (ii) the
Litigation Trustee shall make such valuation available from time to
time to all parties to the Litigation Trust Agreement, to the
extent relevant to such parties for tax purposes.
(c) The Litigation
Trustee shall file returns for the Litigation Trust as a grantor
trust pursuant to Treasury Regulation Section 1.671-4(a) and in
accordance with this Article 5. The Litigation Trustee shall, in
its discretion, make any applicable tax elections on behalf of the
Litigation Trust. The Litigation Trustee shall annually send to
each Litigation Trust Beneficiary a separate statement setting
forth such Litigation Trust Beneficiary’s share of items of
income, gain, loss, deduction, or credit, in accordance with
applicable Treasury Regulations and Rev. Proc. 94- 45, 1994-2 C. B.
684, file (or cause to be filed) any other statements, returns
(including any information returns) or disclosures relating to the
Litigation Trust that is required by any governmental authority or
applicable law, and pay taxes, if any, properly payable by the
Litigation Trust.
(d) Subject to
definitive guidance from the IRS or a court of competent
jurisdiction to the contrary (including the receipt by the
Litigation Trustee of a private letter ruling if the Litigation
Trustee so requests one, or the receipt of an adverse determination
by the IRS upon audit if not contested by the Litigation Trustee),
the Litigation Trustee shall (i) timely elect to treat any
Litigation Trust Assets allocable to, or retained on account of,
the Disputed GUC Reserve, as a “disputed ownership fund” governed
by Treasury Regulation Section 1.468B-9, and (ii) to the extent
permitted by applicable law, report consistently with the foregoing
for state and local income tax purposes. All parties to the
Litigation Trust Agreement shall report for U.S. federal, state and
local income tax purposes consistently with the
foregoing.
(e) The Litigation
Trustee may request an expedited determination of taxes of the
Litigation Trust, including the Disputed GUC Reserve, under Section
505(b) of the Bankruptcy Code for all tax returns filed for, or on
behalf of, the Litigation Trust for all taxable periods through the
dissolution of the Litigation Trust.
5.2 Trust Taxable Income;
Allocations.
(a) Subject to Section
5.2(c) hereof, all Litigation Trust earnings shall be taxable to
the Litigation Trust Beneficiaries.
(b) Subject to Section
5.2(c) hereof, allocations of Litigation Trust taxable income shall
be determined by reference to the manner in which an amount of cash
equal to such taxable income would be distributed if, immediately
prior to such deemed distribution, the Litigation Trust had
distributed all of its other assets (valued for this purpose at
their tax book value) to the Litigation Trust Beneficiaries, taking
into account all prior and concurrent distributions from the
Litigation Trust (including all distributions held in the Disputed
GUC Reserve). Similarly, taxable loss of the Litigation Trust will
be allocated by reference to the manner in which an economic loss
would be borne immediately after a liquidating distribution of the
Litigation Trust. The tax book value of the Litigation Trust Assets
for this purpose shall equal their fair market value upon the
Effective Date, adjusted in either case in accordance with tax
accounting principles prescribed by the IRC, the regulations and
other applicable administrative and judicial authorities and
pronouncements.
(c) The Litigation
Trustee shall be responsible for causing the Litigation Trust to
pay, out of the Litigation Trust Assets, any taxes imposed on the
Litigation Trust or its assets, including the Disputed GUC Reserve
(in the latter instance, first out of any Cash allocable to, or
retained on account of, the Disputed General Unsecured Claim to
which such tax relates), including any income that may arise upon
the distribution of the assets from the Disputed GUC Reserve. In
the event, and to the extent, any Cash retained on account of a
Disputed General Unsecured Claim is insufficient to pay the portion
of any such taxes attributable to the taxable income arising from
the assets allocable to, or retained on account of such claim such
that such portion of the taxes is paid (in whole or in part) from
other available Cash, such other cash sources shall be (i)
reimbursed from any subsequent Cash amounts retained on account of
such claim, or (ii) to the extent such claim has subsequently been
resolved, deducted from any amounts otherwise distributable by the
Litigation Trustee as a result of the resolution of such
claim.
5.3 Withholding.
The
Litigation Trustee may withhold and pay to the appropriate taxing
authority all amounts required to be withheld pursuant to the IRC
or any provision of any foreign, state, or local tax law with
respect to any payment or distribution by the Litigation Trust to
or any amounts received or earned by the Litigation Trust
distributable or allocable to the Litigation Trust Beneficiaries
(including beneficiaries that are not “United States persons” within the
meaning of the IRC). The Litigation Trustee may effect any
withholding with respect to a Litigation Trust Beneficiary by
reducing the amount currently or subsequently distributable to such
beneficiary by the amount withheld. All such amounts withheld from
distributions and paid to the appropriate taxing authority shall be
treated as amounts distributed to such Litigation Trust
Beneficiaries for all purposes of this Litigation Trust
Agreement.
ARTICLE
6
DISTRIBUTIONS
6.1 Allocation of Litigation Trust
Assets.
(a) Subject to Section
6.3 hereof, after payment of Litigation Trust Expenses and
reserving funds for the Litigation Trust Expense Fund and the
Disputed GUC Reserve, the Litigation Trust Assets (excluding
Litigation Trust First Lien Lender Causes of Action and any
proceeds thereof) shall be shared and distributed as
follows:
(i) First, to
Reorganized FCI until repayment in full in Cash of all amounts due
under the Litigation Trust Loan;
(ii) Second,
to Reorganized FCI in an amount up to $180,000;
(iii) Third,
to the holders of Litigation Trust Interests in an amount up to
$1,500,000 (the “GUC
Payment”);
(iv) Fourth,
until the Litigation Trust Assets (excluding Litigation Trust First
Lien Lender Causes of Action and any proceeds thereof) distributed
pursuant to this clause exceed $20,000,000, sixty percent (60%)
shall be distributed to Reorganized FCI and forty percent (40%)
shall be distributed to the holders of Litigation Trust Interests
in accordance with this Litigation Trust Agreement and the Plan;
and
(v) Fifth, after the
Litigation Trust Assets (excluding Litigation Trust First Lien
Lender Causes of Action and any proceeds thereof) distributed
pursuant to clause (iv) above exceed $20,000,000, fifty percent
(50%) shall be distributed to Reorganized FCI and fifty percent
(50%) shall be to the holders of Litigation Trust Interests in
accordance with this Litigation Trust Agreement and the
Plan.
(b) Subject to Section
6.3 hereof, after payment of Litigation Trust Expenses and
reserving funds for the Litigation Trust Expense Fund and the
Disputed GUC Reserve, proceeds of the Litigation Trust First Lien
Lender Causes of Action shall be shared and distributed as
follows:
(i) First, to
Reorganized FCI until the Litigation Trust Loan has been repaid in
full;
(ii) Second,
eighty-five percent (85%) to Reorganized FCI and fifteen percent
(15%) to the holders of Litigation Trust Interests in accordance
with this Litigation Trust Agreement and the Plan.
6.2 Distribution Record
Date.
As of
the close of business on the Distribution Record Date, the various
transfer registers for each of the Classes of Claims or Interests
as maintained by the Debtors or their respective agents shall be
deemed closed for purposes of determining whether a holder of such
a Claim or Interest is a record holder entitled to distributions
under the Plan, and there shall be no further changes in the record
holders or the permitted designees of any such Claims or Interests.
The Litigation Trust shall have no obligation to recognize any
transfer or designation of such Claims or Interests occurring after
the close of business on the Distribution Record Date.
6.3 Limitation on
Transferability.
It is
understood and agreed that the Litigation Trust Interests shall be
non-transferable and non-assignable other than if transferred by
will, intestate succession, or otherwise by operation of law. Any
such transfer or assignment by operation of law shall not be
effective until appropriate notification and proof thereof is
submitted to the Litigation Trustee, and the Litigation Trustee may
continue to cause the Litigation Trust to pay all amounts to or for
the benefit of the assigning Litigation Trust Beneficiary until
receipt of proper notification and proof of such transfer or
assignment (as reasonably determined by the Litigation Trustee).
The Litigation Trustee may rely upon such proof without the
requirement of any further investigation.
6.4 Date of
Distributions.
The
Litigation Trustee, subject to approval of the Litigation Trust
Oversight Committee, shall from time to time determine distribution
dates of Litigation Trust Assets; provided, however, that the Litigation Trust
shall retain such amounts as necessary or appropriate to maintain
the Disputed GUC Reserve and the Litigation Trust Expense Fund.
Subject to and in accordance with Section 5.3 hereof, the
Litigation Trustee may withhold from amounts distributable to any
Entity any and all amounts, determined in the Litigation
Trustee’s reasonable sole discretion, to be required by any
law, regulation, rule, ruling, directive or other governmental
requirement; provided that the Litigation Trustee shall not be
required to make a distribution if the aggregate, net amount of
unrestricted Cash available for distribution is sufficiently small
in amount as to make the distribution impracticable as reasonably
determined by the Litigation Trustee, subject to approval of the
Litigation Trust Oversight Committee.
6.5 Disbursing Agent.
The
Litigation Trust, or its duly appointed agent or designee, shall be
the Disbursing Agent for all distributions to made under this
Litigation Trust Agreement.
6.6 Delivery of
Distributions.
In the
event that any distribution to any Litigation Trust Beneficiary is
returned as undeliverable, no further distributions shall be made
to such holder or such permitted designee unless and until the
Litigation Trustee is notified in writing of such holder’s or
permitted designee’s, as applicable, then-current address, at
which time all currently-due, missed distributions shall be made to
such holder as soon as reasonably practicable thereafter without
interest. Nothing herein shall require the Litigation Trustee to
attempt to locate holders or permitted designees, as applicable, of
undeliverable distributions and, if located, assist such holders or
permitted designees, as applicable, in complying with [Section
6.19] of the Plan.
6.7 Unclaimed
Property.
Undeliverable
distributions or unclaimed distributions to Litigation Trust
Beneficiaries shall remain in the possession of the Litigation
Trust, until such time as a distribution becomes deliverable or
holder accepts distribution, or such distribution reverts back to
the Litigation Trust, and shall not be supplemented with any
interest, dividends, or other accruals of any kind. Such
distributions shall be deemed unclaimed property under Section
347(b) of the Bankruptcy Code at the expiration of three hundred
and sixty-five (365) days from the date of distribution. After such
date all unclaimed property or interest in property shall revert to
the Litigation Trust and the Claim and Litigation Trust Interests
of any other holder to such property or interest in property shall
be discharged and forever barred.
6.8 Time Bar to Cash
Payments.
Checks
issued by the Litigation Trust to Litigation Trust Beneficiaries
shall be null and void if not negotiated within one hundred and
twenty (120) days after the date of issuance thereof. Thereafter,
the amount represented by such voided check shall irrevocably
revert to the Litigation Trust and any Claim on account of the
Litigation Trust Interest in respect of such voided check shall be
discharged and forever barred, notwithstanding any federal or state
escheat laws to the contrary. Requests for re-issuance of any check
shall be made to the Litigation Trustee by the Litigation Trust
Beneficiary to whom such check was originally issued.
6.9 Manner of Payment or
Distribution.
(a) All payments made
by the Litigation Trust to Reorganized FCI shall be payable in
Cash, and the Litigation Trustee shall distribute such Cash by
wire, check, or such other method as the Litigation Trustee deems
appropriate under the circumstances.
(b) All distributions
made by the Litigation Trust to or for the benefit of the holders
of Litigation Trust Interests shall be payable in Cash to the
holders of Litigation Trust Interests of record on the Distribution
Record Date; provided that the distribution shall be made to the
transferee of the Litigation Trust Interest transferred by will,
intestate succession, or otherwise by operation of law if and only
if the Litigation Trustee has actual notice of the identify and
address of the transferee. The Litigation Trustee shall distribute
such cash by wire, check, or such other method as the Litigation
Trustee deems appropriate under the circumstances.
6.10 Minimum
Cash Distributions.
The
Litigation Trust shall not be required to make any distribution of
Cash less than one hundred dollars ($100) to any Litigation Trust
Beneficiary.
6.11 Setoffs
and Recoupments.
The
Litigation Trust may, but shall not be required to, set off or
recoup against any Allowed General Unsecured Claim, and any
distribution to be made on account of such Allowed General
Unsecured Claim, any and all claims, rights, and causes of action
of any nature whatsoever that the Debtors or the Litigation Trust
may have (as successor to the Debtors) against the holder of such
Allowed General Unsecured Claim pursuant to the Bankruptcy Code or
applicable non-bankruptcy law; provided that neither the failure to
do so nor the allowance of any General Unsecured Claim hereunder
shall constitute a waiver or release by the Litigation Trust of any
claims, rights, or causes of action the Litigation Trust may
possess against the holder of such General Unsecured
Claim.
6.12 Withholding
and Reporting Requirements.
(a) In connection with
the Plan, any party issuing any instrument or making any
distribution described in the Plan shall comply with all applicable
withholding and reporting requirements imposed by any federal,
state, or local taxing authority, and all distributions pursuant to
the Plan and all related agreements shall be subject to any such
withholding or reporting requirements. In the case of a non-Cash
distribution that is subject to withholding, the distributing party
may withhold an appropriate portion of such distributed property
and either (i) sell such withheld property to generate Cash
necessary to pay over the withholding tax (or reimburse the
distributing party for any advance payment of the withholding tax),
or (ii) pay the withholding tax using its own funds and retain such
withheld property. Any amounts withheld pursuant to the preceding
sentence shall be deemed to have been distributed to and received
by the applicable recipient for all purposes of the Plan.
Notwithstanding the foregoing, any Entity that receives a
distribution hereunder shall have responsibility for any taxes
imposed by any governmental unit, including, without limitation,
income, withholding, and other taxes, on account of such
distribution. The Litigation Trustee shall have the right, but not
the obligation, to not make a distribution until such recipient has
made arrangements satisfactory to such issuing or disbursing party
for payment of any such tax obligations.
(b) Any party entitled
to receive any property as an issuance or distribution hereunder
shall, upon request, deliver to the Litigation Trust an appropriate
Form W-9 or (if the payee is a foreign Entity) Form W-8. If such
request is made by the Litigation Trustee and the holder fails to
comply before the earlier of (i) the date that is one hundred and
eighty (180) days after the request is made and (ii) the date that
is one hundred and eighty (180) days after the date of
distribution, the amount of such distribution shall irrevocably
revert to the applicable Litigation Trust and any Claim or
Litigation Trust Interest in respect of such distribution shall be
discharged and forever barred from assertion against the Litigation
Trust or the Litigation Trust Assets.
ARTICLE
7
PROCEDURES
FOR DISPUTED CLAIMS
7.1 Objections to
Claims.
The
Litigation Trust shall exclusively be entitled to object to, seek
to subordinate, compromise or settle any General Unsecured Claim.
After the Effective Date, the Litigation Trust shall have and
retain any and all rights and defenses that the Debtors had with
regard to any General Unsecured Claim to which the Litigation Trust
may object, except with respect to any General Unsecured Claim that
is Allowed. Any objections to General Unsecured Claims shall be
served and filed on or before the later of (a) one-hundred and
eighty (180) days after the Effective Date, and (b) on such later
date as may be fixed by the Bankruptcy Court, after notice and a
hearing, upon a motion by the Litigation Trustee that is filed
before the date that is one-hundred and eighty (180) days after the
Effective Date. The expiration of such period shall not limit or
affect the Litigation Trust’s rights to dispute Claims
asserted in the ordinary course of business other than through a
Proof of Claim.
7.2 Resolution of Disputed
Claims.
On and
after the Effective Date, the Litigation Trust shall have the
exclusive authority to object to, compromise, settle, otherwise
resolve, or withdraw any objections to General Unsecured Claims
without approval of the Bankruptcy Court. The Litigation Trustee
shall cooperate with the Reorganized Debtors with respect to any
objections to Claims that seek to convert Claims into General
Unsecured Claims or General Unsecured Claims into other Claims. The
rights and defenses of the Litigation Trustee to any such
objections are fully preserved.
7.3 Estimation of
Claims.
The
Litigation Trustee may (a) determine, resolve and otherwise
adjudicate all contingent, unliquidated, and Disputed General
Unsecured Claims in the Bankruptcy Court and (b) at any time
request that the Bankruptcy Court estimate any contingent,
unliquidated, or Disputed General Unsecured Claim pursuant to
Section 502(c) of the Bankruptcy Code regardless of whether the
Debtors previously objected to such Claim. The Bankruptcy Court
will retain jurisdiction to estimate any General Unsecured Claim at
any time during litigation concerning any objection to any General
Unsecured Claim, including, without limitation, during the pendency
of any appeal relating to any such objection. In the event that the
Bankruptcy Court estimates any contingent, unliquidated, or
Disputed General Unsecured Claim, the amount so estimated shall
constitute either the Allowed amount of such General Unsecured
Claim or a maximum limitation on such General Unsecured Claim, as
determined by the Bankruptcy Court. If the estimated amount
constitutes a maximum limitation on the amount of such General
Unsecured Claim, the Litigation Trustee may pursue supplementary
proceedings to object to the allowance of such General Unsecured
Claim.
7.4 No Distributions Pending
Allowance.
No
payment or distribution provided under the Plan or hereunder shall
be made on account of such General Unsecured Claim unless and until
(and only to the extent that) such Claim becomes an Allowed General
Unsecured Claim.
7.5 Interest.
To the
extent that a Disputed General Unsecured Claim becomes an Allowed
General Unsecured Claim after the Effective Date, the holder of
such Claim shall not be entitled to any interest that accrued
thereon from and after the Effective Date.
7.6 Insured Claims.
If any
portion of an Allowed General Unsecured Claim is an Insured Claim,
no distributions under the Plan or hereunder shall be made on
account of such Allowed General Unsecured Claim until the holder of
such Allowed General Unsecured Claim has exhausted all remedies
with respect to any applicable insurance policies.
7.7 Disputed Claims
Reserve.
(a) From and after the
Effective Date, the Litigation Trustee shall hold and maintain the
Disputed GUC Reserve for the benefit of the holders of such
Disputed General Unsecured Claims, including any Cash and any other
Litigation Trust Assets allocable to such Disputed General
Unsecured Claims (i.e., as if such Holders had received Litigation
Trust Interests on the Effective Date and such Disputed General
Unsecured Claims had been Allowed on the Effective Date),
determined based on (i) the asserted amount of such Disputed
General Unsecured Claim, (ii) such other amount as may be agreed
upon by the holder of such Disputed General Unsecured Claim and the
Litigation Trustee or (iii) such other amount as may be deemed
appropriate by the Litigation Trustee in accordance with the terms
of this Litigation Trust Agreement (in each case, net of any taxes
imposed on, or with respect to, the Disputed GUC Reserve as relates
to such General Unsecured Claim, including in connection with such
distributions).
(b) Any taxes incurred
by the Litigation Trust with respect to assets allocable to, or
retained on account of, a Disputed General Unsecured Claim
(including any taxes that would be incurred upon a distribution of
such assets as a result of the resolution of the Disputed Claim)
will be netted against the amounts otherwise distributable from the
Disputed GUC Reserve in respect of, or as a result of the
resolution of, such General Unsecured Claim. No assets allocable
to, or retained on account of, a Disputed General Unsecured Claim
will be released from the Disputed GUC Reserve until such time as
the Cash otherwise distributable as a result of the resolution of
such Claim is sufficient to pay any taxes incurred or that would be
incurred upon the distribution.
ARTICLE
8
STANDARD
OF CARE; EXCULPATION; INDEMNIFICATION
8.1 Standard of Care;
Exculpation.
(a) To the fullest
extent permitted by applicable law, none of the Litigation Trustee,
the Delaware Trustee, the Litigation Trust Oversight Committee
Members, or their respective members, advisors or professionals,
shall be liable for any damages arising out of the creation,
operation or termination of the Litigation Trust, including actions
taken or omitted in fulfillment of duties with respect to the
Litigation Trust, except in the case of such party’s willful
misconduct, intentional fraud, or knowing violation of law as
determined by a Final Order; provided, that in no event will any
such party be liable for indirect, punitive, incidental, exemplary,
consequential or special damages (including but not limited to lost
profits) under any circumstances. In performing its duties under
this Agreement, the Litigation Trustee, the Delaware Trustee and
the Litigation Trust Oversight Committee Members shall have no
liability for any action taken in accordance with the advice of
counsel, accountants, appraisers and other professionals retained
by the Litigation Trust Oversight Committee (or its members), the
Litigation Trustee, the Delaware Trustee, or the Litigation Trust;
provided, that, none of the Litigation Trustee,
the Delaware Trustee or the Non-Trustee Litigation Trust Oversight
Committee Members shall be under any obligation to consult with
attorneys, accountants, financial advisors, or agents, and a good
faith determination not to consult with attorneys, accountants,
financial advisors, or other agents shall not result in the
imposition of liability on the Litigation Trustee, the Delaware
Trustee or the Litigation Trust Oversight Committee Members. None
of the provisions of this Litigation Trust Agreement shall require
the Litigation Trustee or the members of the Litigation Trust
Oversight Committee to expend or risk their own funds or otherwise
incur personal financial liability in the performance of any of
their duties hereunder or in the exercise of any of their rights
and powers. Notwithstanding the foregoing, nothing in this Section
shall relieve the Litigation Trustee, the Delaware Trustee or the
Litigation Trust Oversight Committee Members from any liability for
any actions or omissions arising out of their willful misconduct,
fraud, or knowing violation of law; provided that in no event will any such Entity
be liable for punitive, exemplary, consequential, or special
damages under any circumstances.
(b) The Litigation
Trustee, the Delaware Trustee and the Non-Trustee Litigation Trust
Oversight Committee Members shall not be subject to any personal
liability whatsoever, whether in tort, contract, or otherwise, to
any Entity in connection with the creation, operation, or
termination of the Litigation Trust to the fullest extent permitted
under Section 3803 of Delaware Statutory Trust Act, and all
Entities claiming against the Litigation Trustee, the Delaware
Trustee or the Non-Trustee Litigation Trust Oversight Committee
Members, or otherwise asserting claims of any nature in connection
with affairs of the Litigation Trust, shall look solely to the
Litigation Trust Assets for satisfaction of any such claims, except
in the case of such party’s willful misconduct, intentional
fraud, or knowing violation of law as determined by a Final
Order.
(c) Except as provided
herein, nothing contained in this Litigation Trust Agreement, the
Plan or the Confirmation Order shall be deemed to be an assumption
by the Litigation Trustee or the Litigation Trust Oversight
Committee Members of any of the liabilities, obligations or duties
of the Debtors or shall be deemed to be or contain a covenant or
agreement by the Litigation Trustee or the Litigation Trust
Oversight Committee Members to assume or accept any such liability,
obligation or duty.
8.2 Fiduciary Duties.
To the
extent that, at law or in equity, the Litigation Trustee, the
Delaware Trustee or any member of the Litigation Trust Oversight
Committee has duties (including fiduciary duties) and liabilities
relating hereto, to the Litigation Trust or to the Litigation Trust
Beneficiaries, it is hereby understood and agreed by the parties
and the Litigation Trust Beneficiaries that such duties and
liabilities are eliminated to the fullest extent permitted by
applicable law, and replaced by the duties and liabilities
expressly set forth in this Litigation Trust Agreement with respect
to the Litigation Trustee, the Delaware Trustee and the Litigation
Trust Oversight Committee.
8.3 Indemnification of Litigation Trustee
and Litigation Trust Oversight Committee.
(a) To the fullest
extent permitted by law, the Litigation Trust, to the extent of its
assets legally available for that purpose, shall defend, indemnify
and hold harmless the Litigation Trustee, the Delaware Trustee and
the Litigation Trust Oversight Committee Members and each of their
directors, members, employers, affiliates, shareholders, partners,
officers, agents, employees, attorneys, advisors, and other
professionals (collectively, the “Indemnified Persons”) from and
against any and all losses, costs, reasonable and documented
out-of-pocket expenses (including, without limitation, fees and
expenses of attorneys and other advisors and any court costs
incurred by any Indemnified Person) or damage of any kind, type or
nature, whether arising in tort, contract or otherwise or liability
by reason of anything any Indemnified Person did, does, or refrains
from doing for the business or affairs of the Litigation Trust,
except to the extent that the loss, cost, damage, expense or
liability resulted primarily from the Indemnified Person’s
willful misconduct, intentional fraud, or knowing violation of law
as determined by a Final Order. The Litigation Trust shall pay in
advance or reimburse reasonable and documented out-of-pocket
expenses (including, without limitation, the costs of
investigating, preparing, defending or settling such action)
incurred by the Indemnified Person who is or is threatened to be
named or made a defendant or a respondent in a proceeding
concerning the business and affairs of the Litigation
Trust.
(b) Any Indemnified
Person may waive the benefits of indemnification under this Section
8.3, but only by an instrument in writing executed by such
Indemnified Person.
(c) The rights to
indemnification under this Section 8.3 are not exclusive of other
rights which any Indemnified Person may otherwise have at law or in
equity, including without limitation common law rights to
indemnification or contribution. Nothing in this Section 8.3 will
affect the rights or obligations of any Entity (or the limitations
on those rights or obligations) under this Litigation Trust
Agreement, or any other agreement or instrument to which that
Entity is a party.
ARTICLE
9
TERM;
TERMINATION OF LITIGATION TRUST
9.1 Term; Termination of Litigation
Trust.
(a) Subject to Section
9.1(c) hereof, the Litigation Trustee, the Litigation Trust, and
the Litigation Trust Oversight Committee Members may be discharged
or dissolved, as the case may be, at such time as (i) the
Litigation Trust Oversight Committee, by a majority vote,
determines, in its sole discretion, that the pursuit of additional
Litigation Trust Causes of Action is not likely to yield sufficient
additional proceeds to justify further pursuit of such claims (the
“Termination
Right”), and (ii) all distributions required to be
made by the Litigation Trustee under the Plan and the Litigation
Trust Agreement have been made.
(b) Upon termination
and dissolution of the Litigation Trust, any remaining Litigation
Trust Assets shall be distributed to the Litigation Trust
Beneficiaries in accordance with Section 5.2(b) of the Plan and
Article 6 hereof.
(c) In the event the
Litigation Trust Oversight Committee exercises its Termination
Right without the consent (which may not be unreasonably withheld,
conditioned or delayed) of the UCC Designee, the Litigation Trust
shall distribute the GUC Payment before making any other
distributions pursuant to Article 6 hereof and Section 5.2 of the
Plan (with the GUC Payment deemed to have been made for purposes of
the waterfall set forth in Section 5.2(b)(vi) of the Plan and
Section 6.1 hereof); provided that the UCC Designee may choose to
use the GUC Payment to either (x) make a distribution to the
holders of Litigation Trust Interests or (y) continue the existence
of the Litigation Trust and prosecute the Litigation Trust Causes
of Action for the sole benefit of the holders of Litigation Trust
Interests. In the event the UCC Designee chooses to continue the
existence of the Litigation Trust and prosecute the Litigation
Trust Causes of Action for the sole benefit of the holders of
Litigation Trust Interests (an “Exercise of the UCC Option”), this
Agreement shall remain in full force and effect, except that: (i)
the Reorganized FCI will no longer be a Litigation Trust
Beneficiary or entitled to any distributions from the proceeds of
any Litigation Trust Causes of Action; (ii) the First Lien Lender
Designee shall be removed from the Litigation Trust Oversight
Committee and discharged from any duties or obligations under this
Agreement; and (iii) the Litigation Trustee shall be deemed to have
been removed pursuant to Section 3.3 hereof, and the UCC Designee
may appoint a replacement Litigation Trustee. In the event the
Reorganized Debtors fail to honor an Advance (as defined in the
Litigation Trust Loan Agreement) when due under the Litigation
Trust Loan Agreement, such failure shall be deemed to provide the
UCC Designee with the option to trigger the Exercise of the UCC
Option. If the Exercise of the UCC Option is triggered, all
obligations of the Lender (as defined in the Litigation Trust Loan
Agreement) to fund future Advances under the Litigation Trust Loan
Agreement shall terminate.
(d) Subject to Section
9.1 hereof, if at any time the Litigation Trust Oversight Committee
determines that the expense of administering the Litigation Trust
so as to make a distribution to the Litigation Trust Beneficiaries
is likely to exceed the value of the assets remaining in the
Litigation Trust, the Litigation Trustee may apply to the
Bankruptcy Court for authority to (i) reserve any amount necessary
to dissolve the Litigation Trust, (ii) donate any balance to a
charitable organization (A) described in Section 501(c)(3) of the
IRC, (B) exempt from U.S. federal income tax under Section 501(a)
of the IRC, and (C) that is not a “private foundation”, as defined in
Section 509(a) of the IRC, and (iii) dissolve the Litigation Trust.
Upon receipt of such authority from the Bankruptcy Court, the
Litigation Trustee shall notify each Litigation Trust
Beneficiary.
(e) The term of the
Litigation Trust shall end no later than the fifth (5th)
anniversary of the Effective Date (the “Initial Litigation Trust Term”);
provided, however, that the Litigation Trustee may, subject to the
further provisions of this Section, extend the term of the
Litigation Trust for such additional period of time as is necessary
to facilitate or complete the recovery and liquidation of the
Litigation Trust Assets as follows: within the six (6) month period
prior to the termination of the Initial Litigation Trust Term, the
Litigation Trustee may file a notice of intent to extend the term
of the Litigation Trust with the Bankruptcy Court and, upon
approval of the Bankruptcy Court of such extension request
following notice and a hearing, the term of the Litigation Trust
shall be so extended. The Litigation Trust may file one or more
such extension notices, each notice to be filed within the six (6)
month period prior to the termination of the extended term of the
Litigation Trust (all such extensions, collectively, are referred
to herein as the “Supplemental Litigation Trust
Term”). Notwithstanding anything to the contrary in
this Section 9.1(e), however, the Supplemental Litigation Trust
Term may not exceed three (3) years without a favorable letter
ruling from the IRS that any further extension would not adversely
affect the status of the Litigation Trust as a liquidating trust
for federal income tax purposes. In addition, the provisions of
this Section 9.1(e) shall be without prejudice to the right of any
party in interest under Section 1109 of the Bankruptcy Code to
petition the Bankruptcy Court, for cause shown, to shorten the
Supplemental Litigation Trust Term.
9.2 Continuance of Trust for Winding
Up.
After
the termination of the Litigation Trust and for the purpose of
litigation and winding up the affairs of the Litigation Trust, the
Litigation Trustee shall continue to act as such until its duties
have been fully performed. Prior to the final distribution of all
of the remaining assets of the Litigation Trust, the Litigation
Trustee shall be entitled to reserve from such assets any and all
amounts required to provide for the Litigation Trust Expenses,
until such time as the winding up of the Litigation Trust is
completed. Upon the dissolution of the Litigation Trust and the
completion of the winding up of the assets, liabilities and affairs
of the Litigation Trust pursuant to the Delaware Statutory Trust
Act, the Litigation Trustee shall (or the Delaware Trustee may)
file a certificate of cancellation with the State of Delaware to
terminate the Litigation Trust. Except as otherwise specifically
provided herein, upon the termination of the Litigation Trust, the
Litigation Trust Oversight Committee (including the Litigation
Trustee) shall have no further duties or obligations
hereunder.
ARTICLE
10
AMENDMENT
AND WAIVER
10.1 Amendment
and Waiver.
(a) Subject to approval
of the Litigation Trust Oversight Committee, the Litigation Trustee
may amend, supplement or waive any provision of, this Litigation
Trust Agreement, without approval of the Bankruptcy Court or the
consent of any Litigation Trust Beneficiary: (i) to cure any
ambiguity, omission, defect or inconsistency in this Litigation
Trust Agreement provided that such amendments, supplements or
waivers shall not contravene or otherwise be inconsistent with the
terms of the Plan (including the Global Settlement) and the
Confirmation Order, adversely affect the distributions to be made
or other rights under this Litigation Trust Agreement to any of the
Litigation Trust Beneficiaries, or adversely affect the U.S.
federal income tax status of the Litigation Trust as a
“liquidating
trust”; (ii) to comply with any requirements in
connection with the U.S. federal income tax status of the
Litigation Trust as a “liquidating trust”; (iii) to
comply with any requirements in connection with maintaining that
the Litigation Trust is not subject to registration or reporting
requirements of the Exchange Act or the Investment Company Act;
(iv) to make the Litigation Trust a reporting entity and, in such
event, to comply with any requirements of the Exchange Act or the
Investment Company Act; and (v) to evidence and provide for the
acceptance of appointment hereunder by a successor trustee in
accordance with the terms of this Litigation Trust
Agreement.
(b) Any substantive
provision of this Litigation Trust Agreement may be amended or
waived by the Litigation Trust Oversight Committee, without
approval of the Bankruptcy Court or the consent of any Litigation
Trust Beneficiary; provided, however, that no change may be made to
this Litigation Trust Agreement that contravenes or is otherwise
inconsistent with the terms of the Plan (including the Global
Settlement) and the Confirmation Order, or would adversely affect
the distributions to be made under this Litigation Trust Agreement
to any of the Litigation Trust Beneficiaries, or adversely affect
the U.S. federal income tax status of the Litigation Trust as a
“liquidating
trust” ; provided further that no amendment or waiver
affecting the Delaware Trustee shall be effectuated without the
consent of the Delaware Trustee. Notwithstanding this Section 10.1,
any amendments to this Litigation Trust Agreement shall not be
inconsistent with the purpose and intention of the Litigation Trust
to liquidate in an expeditious but orderly manner the Litigation
Trust Assets in accordance with Treasury Regulation Section
301.7701-4(d).
ARTICLE
11
DELAWARE
TRUSTEE
11.1 Appointment
and Purpose of the Delaware Trustee.
The
Litigation Trust shall at all times have a trustee that meets the
requirements of Section 3807(a) of the Delaware Statutory Trust
Act. The Delaware Trustee is appointed to serve as the trustee of
the Litigation Trust in the State of Delaware for the sole purpose
of satisfying the requirement of Section 3807(a) of the Delaware
Statutory Trust Act that the Litigation Trust have at least one
trustee with a principal place of business in the State of
Delaware. It is understood and agreed by the parties to this
Agreement that the Delaware Trustee shall not otherwise be a
trustee hereunder and shall have none of the duties or liabilities
of the Litigation Trustee.
11.2 Duties
of the Delaware Trustee.
The
duties of the Delaware Trustee shall be limited to (a) accepting
legal process served on the Litigation Trust in the State of
Delaware and (b) the execution of any certificates required to be
filed with the Delaware Secretary of State that the Delaware
Trustee is required to execute under Section 3811 of the Delaware
Statutory Trust Act. To the extent that, at law or in equity, the
Delaware Trustee has duties (including fiduciary duties) and
liabilities relating thereto to the Litigation Trust or the
Litigation Trust Beneficiaries, it is hereby understood and agreed
by the parties to this Agreement and the Litigation Trust
Beneficiaries that such duties and liabilities are replaced by the
duties and liabilities of the Delaware Trustee expressly set forth
in this Litigation Trust Agreement. The Delaware Trustee shall have
no liability for the acts or omissions of the Litigation Trustee or
any other Entity.
11.3 Removal
and Replacement of the Delaware Trustee.
The
Delaware Trustee may be removed by the Litigation Trustee upon
thirty days prior written notice to the Delaware Trustee. The
Delaware Trustee may resign upon thirty days prior written notice
to the Litigation Trustee. Upon the resignation or removal of the
Delaware Trustee, the Litigation Trustee shall appoint a successor
Delaware Trustee. If no successor has been appointed within such
thirty day period, a court of competent jurisdiction may be
petitioned (at the expense of the Litigation Trust) to appoint a
successor Delaware Trustee.
11.4 Successor
Delaware Trustee.
Any
Entity into which the Delaware Trustee may be merged or with which
it may be consolidated, or any Entity resulting from any merger or
consolidation to which the Delaware Trustee shall be a party, or
any Entity which succeeds to all or substantially all of the
corporate trust business of the Delaware Trustee, shall be the
successor Delaware Trustee under this Litigation Trust Agreement
without the execution, delivery or filing of any paper or
instrument or further act to be done on the part of the parties to
this Agreement, except as may be required by the Delaware Statutory
Trust Act.
11.5 Compensation
of the Delaware Trustee.
The
Delaware Trustee shall be entitled to receive compensation from the
Litigation Trust for its services as shall have been separately
agreed to from time to time in writing by the Delaware
Trustee.
ARTICLE
12
MISCELLANEOUS
PROVISIONS
12.1 Intention
of Parties to Establish a Liquidating Trust.
This
Litigation Trust Agreement is intended to create a
“liquidating
trust” for U.S. federal income tax purposes and, to
the extent provided by law, shall be governed and construed in all
respects as such a trust and any ambiguity herein shall be
construed consistent herewith and, if necessary, this Litigation
Trust Agreement may be amended in accordance with Section 10.1
hereof to comply with such U.S. federal income tax laws, which
amendments may apply retroactively.
12.2 Reimbursement
of Trust Litigation Costs.
If the
Litigation Trustee or the Litigation Trust, as the case may be, is
the prevailing party in a dispute regarding the provisions of this
Litigation Trust Agreement or the enforcement thereof, the
Litigation Trustee or the Litigation Trust, as the case may be,
shall be entitled to collect any and all costs, reasonable and
documented out-of-pocket expenses and fees, including
attorneys’ fees, from the non-prevailing party incurred in
connection with such dispute or enforcement action. To the extent
that the Litigation Trust has advanced such amounts, the Litigation
Trust may recover such amounts from the non-prevailing
party.
12.3 Laws
as to Construction.
This
Litigation Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard
to whether any conflicts of law would require the application of
the law of another jurisdiction.
12.4 Jurisdiction.
Without
limiting any Entity’s right to appeal any order of the
Bankruptcy Court or to seek withdrawal of the reference with regard
to any matter, (i) the Bankruptcy Court and the courts of the State
of Delaware shall each have jurisdiction to enforce the terms of
this Litigation Trust Agreement and to decide any claims or
disputes which may arise or result from, or be connected with, this
Litigation Trust Agreement, any breach or default hereunder, or the
transactions contemplated hereby, and (ii) any and all actions
related to the foregoing shall be filed and maintained only in the
Bankruptcy Court or the courts of the State of Delaware, and the
parties, including the Litigation Trust Beneficiaries and any
holders of General Unsecured Claims hereby consent to and submit to
the jurisdiction and venue of the Bankruptcy Court and the courts
of the State of Delaware.
12.5 Severability.
If any
provision of this Litigation Trust Agreement or the application
thereof to any Entity or circumstance shall be finally determined
by a court of competent jurisdiction to be invalid, or
unenforceable to any extent, the remainder of this Litigation Trust
Agreement, or the application of such provision to Entities or
circumstances other than those as to which it is held nvalid or
unenforceable, shall not be affected thereby, and such provision of
this Litigation Trust Agreement shall be valid and enforced to the
fullest extent permitted by law.
12.6 Notices.
All
notices, requests or other communications to the parties hereto
shall be in writing and shall be sufficiently given only if (i)
delivered in person; (ii) sent by electronic mail or facsimile
communication (as evidenced by a confirmed fax transmission
report); (iii) sent by registered or certified mail, return receipt
requested; or (iv) sent by commercial delivery service or courier.
Until a change of address is communicated, as provided below, all
notices, requests and other communications shall be sent to the
parties at the following addresses or facsimile
numbers:
If to
the Litigation Trustee to:
With a
copy to:
If to
Reorganized FCI to:
With a
copy to:
If to
the First Lien Lender Designee, to:
With a
copy to:
If to
the UCC Designee, to:
With a
copy to:
All
notices shall be effective and shall be deemed delivered: (i) if by
personal delivery, delivery service or courier, on the date of
delivery; (ii) if by electronic mail on the date of receipt; and
(iii) if by mail, on the date of receipt. Any party from time to
time may change its address, electronic mail address, or other
information for the purpose of notices to that party by giving
notice specifying such change to the other party
hereto.
12.7 Fiscal
Year.
The
fiscal year of the Litigation Trust will begin on the first day of
January and end on the last day of December of each
year.
12.8 Headings.
The
section headings contained in this Litigation Trust Agreement are
solely for convenience of reference and shall not affect the
meaning or interpretation of this Litigation Trust Agreement or of
any term or provision hereof.
12.9 Counterparts.
This
Litigation Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original
instrument, but all together shall constitute one
agreement.
12.10 Confidentiality.
The
Litigation Trustee and each successor trustee and any member of the
Litigation Trust Oversight Committee (each a “Covered Person”) shall, during the
period that they serve in such capacity under this Litigation Trust
Agreement and following either the termination of this Litigation
Trust Agreement or such individual’s removal, incapacity, or
resignation hereunder, hold strictly confidential and not use for
personal gain any material, non-public information of or pertaining
to any entity to which any of the assets of the Litigation Trust
relates or of which it has become aware in its capacity (the
“Information”),
except to the extent disclosure is required by applicable law,
order, regulation or legal process. In the event that any Covered
Person is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena,
civil investigation, demand or similar legal process) to disclose
any Information, such Covered Person will furnish only that portion
of the Information, which the Covered Person, advised by counsel,
is legally required to and exercise all reasonable efforts to
obtain reliable assurance that confidential treatment will be
accorded the Information.
12.11 Entire
Agreement.
This
Litigation Trust Agreement (including the Recitals), the
Confirmation Order, and the Plan (including the Global Settlement)
constitute the entire agreement by and among the parties hereto
with respect to the subject matter hereof, and there are no
representations, warranties, covenants or obligations except as set
forth herein or therein. This Litigation Trust Agreement and the
Plan (including the Global Settlement) supersede all prior and
contemporaneous agreements, understandings, negotiations,
discussions, written or oral, of the parties hereto, relating to
any transaction contemplated hereunder. Except as otherwise
specifically provided herein, the Confirmation Order, or in the
Plan (including the Global Settlement), nothing in this Litigation
Trust Agreement is intended or shall be construed to confer upon or
to give any person other than the parties thereto and their
respective heirs, administrators, executors, successors, or assigns
any right to remedies under or by reason of this Litigation Trust
Agreement.
REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
IN
WITNESS WHEREOF, the parties hereto have either executed and
acknowledged this Litigation Trust Agreement, or caused it to be
executed and acknowledged on their behalf by their duly authorized
officers all as of the date first above written.
FUSION
CONNECT, INC.
FUSION
BCHI ACQUISITION LLC
FUSION
NBS ACQUISITION CORP.
FUSION
LLC
FUSION
MPHC HOLDING
CORPORATION
FUSION
MPHC GROUP, INC.
FUSION
CLOUD COMPANY LLC
FUSION
CLOUD SERVICES, LLC
FUSION
CB HOLDINGS, INC.
FUSION
COMMUNICATIONS, LLC FUSION TELECOM, LLC
FUSION
TEXAS HOLDINGS, INC.
FUSION
TELECOM OF KANSAS, LLC
FUSION
TELECOM OF OKLAHOMA, LLC
FUSION
TELECOM OF MISSOURI, LLC
BIRCAN
HOLDINGS, LLC
FUSION
MANAGEMENT SERVICES LLC
FUSION
PM HOLDINGS, INC.
Name:
James P. Prenetta,
Jr.
Title:
Executive Vice
President and
General
Counsel
FUSION
TELECOM OF TEXAS LTD., L.L.P.
BY:
FUSION
TEXAS HOLDINGS, INC.,
AS LIMITED PARTNER
Name:
James P. Prenetta,
Jr.
Title:
Executive Vice
President and
General
Counsel
CREDITORS’
COMMITTEE:
By:
Title:
LITIGATION
TRUSTEE:
By:
Title:
DELAWARE
TRUSTEE:
By:
Title:
UCC
DESIGNEE:
By:
Title:
FIRST
LIEN LENDER DESIGNEE:
By:
Title:
Exhibit A
Trustee Compensation Schedule
The
Original Trustee shall be entitled to the following
compensation:
Monthly Fees. The Litigation Trust shall pay the Original
Trustee a fixed monthly fee of ten thousand dollars ($10,000) per
month (the “Monthly
Fees”). The Monthly Fees shall be payable in advance
each month on the first day of each month until the termination of
the Original Trustee’s appointment pursuant to the Litigation
Trust Agreement, the Plan, and the Confirmation Order; provided that the Monthly Fee payable
for the first and last month of the Original Trustee’s
engagement shall be prorated for the actual number of days the
Original Trustee is engaged during each such month; provided, further, that the first
Monthly Fee shall be payable immediately upon the appointment of
the Original Trustee on the Effective Date. The Monthly Fees shall
be fully earned as of the first day of such month.
Expense Reimbursement. In addition to any Monthly Fees and
the Additional Compensation (as defined below) payable to the
Original Trustee, the Litigation Trust shall promptly reimburse the
Original Trustee, following delivery to the Litigation Trust of a
reasonably detailed written invoice, for all reasonable, documented
out-of-pocket expenses (including, for the avoidance of doubt,
costs, reasonable expenses or obligations incurred by counsel,
advisors, professionals, or other third-parties properly employed
by the Litigation Trustee to assist with the administration of the
Litigation Trust or in any manner connected, incidental or related
thereto), travel and lodging, data processing and communications
charges, courier services and other expenditures incurred in
connection with, or arising out of the Original Trustee’s
services provided under the Litigation Trust Agreement (the
“Expense
Reimbursement”); provided that Expense Reimbursement
that exceeds a threshold determined by the Litigation Trust
Oversight Committee shall require prior approval of the Litigation
Trust Oversight Committee.
Additional Compensation. In addition to the Monthly Fees and
the Expense Reimbursement, the Litigation Trust shall pay the
Original Trustee the following additional compensation (the
“Additional
Compensation”):
●
As used herein,
“Net Litigation Trust
Proceeds” means, on any date of determination, the
aggregate amount of proceeds actually received by the Litigation
Trust as a result of the Litigation Trust Causes of Action, less
(i) the aggregate amount of all costs and expenses, as set forth in
the Litigation Trust’s books and records, actually incurred
(whether or not paid) by the Litigation Trust in connection with
investigating, prosecuting, settling, liquidating, or disposing of
the Litigation Trust Causes of Action, (ii) the Litigation Trust
Initial Funding and (iii) the Litigation Trust Loan
Proceeds.
●
At such time as Net
Litigation Trust Proceeds equal or exceed five million dollars
($5,000,000), an amount in Cash equal to 3.5% of such Net
Litigation Trust Proceeds.
The
Additional Compensation, if earned, shall be paid to the Original
Trustee upon the earlier of: (i) contemporaneously with the
discharge of the Original Trustee and termination of the Litigation
Trust or (ii) upon the Original Trustee’s resignation or
removal as Litigation Trustee for any reason (other than for
willful misconduct, fraud, or knowing violation of
law).
General Terms.
●
No amounts payable
hereunder shall be subject to reduction, setoff, disgorgement or
reimbursement, other than pursuant to a final order of the
Bankruptcy Court or with the prior written consent of the Original
Trustee.
●
No fee or amount
paid or payable to any other Entity by the Litigation Trust or by
any other Entity shall reduce or otherwise affect the Monthly Fees,
Additional Compensation, or Expense Reimbursement paid or payable
to the Original Trustee, except to the extent used in calculating
Net Litigation Trust Proceeds.
●
All amounts paid to
the Original Trustee shall be in Cash, in United States currency,
and on or by the dates set forth herein.
●
All other terms of
the Original Trustee’s engagement are set forth in the
Litigation Trust Agreement, the Plan, and the Confirmation
Order.
Exhibit E
Litigation Trust Loan Agreement
UNSECURED PROMISSORY NOTE
|
$3,500,000 ________
|
__,
2019
|
THIS UNSECURED PROMISSORY NOTE (this
“Note”) is
executed as of [ ], 2019 by Neal P. Goldman, solely in his capacity
as trustee of the Litigation Trust, having an address at c/o [ ]
(“Borrower”) and
[Fusion Connect, Inc.], having an address [210 Interstate North
Parkway, Suite 300. Atlanta, GA 30339] (together with its permitted
successors and/or assigns, “Lender”). This note is being
executed in connection with the global settlement by and among the
Debtors, the Creditors’ Committee, the Consenting First Lien
Lenders, and the Consenting Second Lien Lenders incorporated in,
inter alia, Section 5.2(b)
of the [Second] Amended Joint
Chapter 11 Plan of Fusion Connect, Inc. and its Subsidiaries
(as amended, the “Plan”) [ECF No. 455]. Capitalized
terms used in this Note and not otherwise defined shall have the
meanings ascribed to them in the Plan or the Litigation Trust
Agreement.
RECITALS
WHEREAS, on June 3,
2019, each Debtor commenced a case (collectively, the
“Chapter 11
Cases”) by filing a petition for relief under chapter
11 of title 11 of the United States Code (the “Bankruptcy Code”) in the Southern
District of New York (the “Bankruptcy Court”) which Chapter
11 Cases are jointly administered under case no. 19¬11811
(SMB);
WHEREAS, on October
7, 2019, the Debtors filed the Plan;
WHEREAS, on
[●, 2019], the Debtors filed the Plan Supplement [ECF No.
●];
WHEREAS, on
[●, 2019], the Bankruptcy Court entered an order confirming
the Plan [ECF No. ●];
WHEREAS, in
accordance with the Plan, Litigation Trust Agreement, and Global
Settlement, Lender wishes to make a loan to Borrower in the maximum
principal amount of up to $3,500,000 (as increased from time to
time after the date hereof in accordance with Sections 6 and/or
7(a) below) upon the terms and conditions set forth herein (the
“Loan”);
and
WHEREAS, Borrower
and Lender intend these Recitals to be a material part of this
Note.
NOW,
THEREFORE, in consideration of the making of the Loan by Lender and
for other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the Borrower hereby
agrees as follows:
FOR
VALUE RECEIVED Borrower, hereby unconditionally promises to pay to
the Lender, or at such place as the Lender may from time to time
designate in writing, the principal sum of $3,500,000, or such
other amount as is outstanding from time to time, in lawful money
of the United States of America, with interest thereon and fees
specified herein to be computed and paid in accordance with the
terms of this Note.
1. Defined Terms. The following
terms shall have the meanings ascribed thereto:
“Advance” means each disbursement
of the Loan made by Lender to Borrower.
“Applicable Rate” means a rate per
annum equal to [ ]%1.
“Borrower Event of Default” means
the failure of Borrower to (i) pay when due any monetary
obligations required to be paid to Lender hereunder or (ii)
perform, comply with or observe any agreement, covenant or
obligation under Section 3.
“Borrowing Notice” has the meaning
assigned to such term in Section 4(b).
“Business Day” means any day that
is not a Saturday, Sunday or other day on which commercial banks in
New York City are authorized or required by law to remain
closed.
“Commitment Fee” has the meaning
assigned to such term in Section 5.
“Default Rate” means a rate per
annum equal to the sum of two percent (2%) plus the Applicable
Rate. The Default Rate shall be calculated on the basis of the
actual number of days elapsed and a year of 360 days.
“Funding Date” has the meaning
assigned to such term in Section 4(a).
“Interest” means interest payable
on the Loan at the Applicable Rate.
“Lender Event of Default” means the
failure of Lender to make an Advance when due or otherwise fail to
perform, comply with, or observe any agreement, covenant or
obligation under Section 4.
“Loan” has the meaning assigned to
such term in the preamble paragraphs of this
Agreement.
“Maturity Date” has the meaning
assigned to such term in Section 2(b).
“Payment Date” means the last day
of each calendar quarter, or if such day is not a Business Day,
then the next succeeding Business Day.
“PIK Amount” has the meaning
assigned to such term in Section 7(a).
“Register” has the meaning assigned
to such term in Section
12.
“Registered Note” has the meaning
assigned to such term in Section 12.
“Requested Advance Amount” has the
meaning assigned to such term in Section 4(b).
“Requested Disbursement Date” has
the meaning assigned to such term in Section 4(b).
“Termination Date” has the meaning
assigned to such term in Section 5.
“Unused Commitment” means, at any
time:
(i) prior
to [the six-month anniversary of
the effective date], zero,
(ii) on
or after [the six-month
anniversary of the effective date] but prior to
[the one-year anniversary of the
effective date], $1,000,000 minus the principal amount of
Advance made on the Funding Date occuring on or about [the six-month anniversary of the effective
date],
(iii) on
or after [the one-year anniversary
of the effective date] but prior to [the 18-month anniversary of the effective
date], (x) $1,000,000 minus the principal amount of Advance
made on the Funding Date occuring on or about [the one-year anniversary of the effective
date] plus (y) the amount specified in clause
(ii),
(iv) on
or after [the 18-month anniversary
of the effective date] but prior to [the two-year anniversary of the effective
date], (x) $500,000 minus the principal amount of Advance
made on the Funding Date occuring on or about [the 18-month anniversary of the effective
date] plus (y) the amount specified in clause (iii),
(v) on
or after [the two-year anniversary
of the effective date] but prior to [the 30-month anniversary of the effective
date], (x) $500,000 minus the principal amount of Advance
made on the Funding Date occuring on or about [the two-year anniversary of the effective
date] plus (y) the amount specified in clause (iv) and
(vi) on
or after [the 30-month anniversary
of the effective date], (x) $500,000 minus the principal
amount of Advance made on the Funding Date occuring on or about
[the 30-month anniversary of the
effective date] plus (y) the amount specified in clause
(v).
2. Term/Repayment.
(a) The
Borrower shall repay the principal amount of the Note within ten
(10) days of the receipt by the Borrower of any net proceeds of
Litigation Trust Causes of Action in an amount equal to such
receipts after the Litigation Expense Fund has been fully
funded.
(b) The
unpaid principal amount of the Loan together with all unpaid
Interest thereon and all unpaid Commitment Fee shall be due and
payable at the earlier of (i) [_]2 and (ii) winding up of the Litigation
Trust (the “Maturity
Date”).
3. Use of Loan Proceeds. The
Borrower shall use the proceeds from the Loan solely to satisfy
Litigation Trust Expenses in accordance with the Litigation Trust
Agreement, and the Borrower covenants and agrees that, until the
Maturity Date, unless the Lender shall otherwise consent in writing
(which consent shall not be unreasonably withheld), the Borrower
will not incur, create, assume or permit to exist any funded
indebtedness, except indebtedness created under this
Note.
4. Loan Disbursement
Mechanics.
(a) Commitment.
Subject to Section 4(b), Lender will make available to Borrower in
separate Advances in a principal amount of (i) $1,000,000 on [
]3 and [ ]4 and (ii) $500,000 on [ ]5, [ ]6 and [ ]7 (the date of each such advance, a
“Funding Date”),
provided that, at any time, subject to Section 6 below, the
aggregate principal amount of Advances made to the Borrower may not
exceed $3,500,000;
(b) Advances.
As a condition to the disbursement of any Advance, Borrower shall
deliver to Lender a prior written notice (the “Borrowing Notice”) at least [three
(3) Business Days] prior to the Requested Disbursement Date (as
defined below) setting forth (i) the amount of the requested
Advance (the “Requested
Advance Amount”) and (ii) the date on which such
Advance is to be disbursed, which shall be on or after the relevant
Funding Date (the “Requested
Disbursement Date”). Provided no Borrower Event of
Default has occurred and is continuing, Lender shall make available
to Borrower the Requested Advance Amount on the Requested
Disbursement Date. Advances repaid or prepaid may not be
reborrowed.
(c) Evidence
of Debt. Lender is authorized to record on the grid attached
hereto as Exhibit A each Advance made to Borrower and each payment
or prepayment thereof. The entries made by Lender shall, to the
extent permitted by applicable law, be prima facie evidence of the
existence and amounts of the obligations of Borrower therein
recorded; provided,
however, that the failure of Lender to record such payments
or prepayments, or any inaccuracy therein, shall not in any manner
affect the obligation of Borrower to repay (with applicable
Interest) the Loan and pay the Commitment Fee in accordance with
the terms of this Note.
__________________________________
5. Interest Rate and Commitment
Fee. Until paid in full, the unpaid principal amount of the
Loan shall bear interest at the Applicable Rate. Until the Loan is
paid in full and the Lender’s obligations and commitment to
make the Advances are terminated (the “Termination Date”), the Unused
Commitment shall accrue a fee (the “Commitment Fee”) at a per annum
rate equal to 4%. Interest and Commitment Fee shall be calculated
on the basis of the actual number of days elapsed and a year of 360
days. Notwithstanding the foregoing or anything to the contrary
contained herein, if a Borrower Event of Default shall have
occurred and be continuing, at the request of the Lender, the
outstanding principal balance of the Loan shall bear interest from
and including the date of the occurrence of such Borrower Event of
Default (both before and after judgment) at a rate of interest per
annum equal to the Default Rate, which interest at the Default Rate
shall accrue upon demand of Lender until the Borrower Event of
Default is either (i) cured within any applicable cure period or
any extension thereof granted by Lender in writing in its
discretion or (ii) waived by Lender in writing in its
discretion.
6. Increases. The Borrower may at
any time or from time to time after the date hereof, by notice to
the Lender, request one or more increases to the principal amount
of the Loan, which shall be subject to the Lender’s consent
(acting in its sole and absolute discretion) and shall be on terms
satisfactory to the Borrower and the Lender (including with respect
to the date of any Advance).
7. Payments.
(a) Interest
and Commitment Fee Payments. On each Payment Date, Borrower
shall pay Lender all accrued but unpaid interest on the unpaid
principal balance of the Loan and all accrued but unpaid Commitment
Fee. Notwithstanding any provision in this Note to the contrary,
prior to the Maturity Date, in lieu of paying in cash the Interest
and Commitment Fee accrued to any Payment Date, any accrued but
unpaid Interest and Commitment Fee shall be, at the option of the
Borrower, either (i) paid in cash or (ii) capitalized and added as
of such Payment Date to the principal amount of this Note (the
“PIK Amount”);
it being understood and agreed that to the extent such interest or
Commitment Fee is not paid in cash on the applicable Payment Date,
the Borrower shall be deemed to select to pay such interest or
Commitment Fee in the PIK Amount. Such PIK Amount shall bear
interest from the applicable Payment Date at the same rate per
annum and be payable in the same manner as in the case of the
original principal amount of this Note and shall otherwise be
treated as principal of this Note for all purposes. From and after
each Payment Date, the principal amount of this Note shall, without
further action on the part of the Borrower or Lender be deemed to
be increased by the PIK Amount so capitalized and added to
principal in accordance with the provisions hereof.
(b) Principal.
On the Maturity Date, Borrower shall repay in full the entire
unpaid principal amount (including as increased pursuant to
Sections 6 and/or 7(a) above) of the Loan, together with all unpaid
accrued Interest and Commitment Fee and all other fees and sums
then payable hereunder.
(c) Prepayment.
Borrower may prepay the Loan in whole or in part at any time
without premium or penalty.
(d) General
Payment Terms. All payments made by Borrower hereunder shall
be made on or before 2:00 PM New York City time. Any payments
received after such time shall be credited to the next following
Business Day. In the event any such advance or charge is not so
repaid by Borrower, Lender may, at its option, first apply any
payments received under this Note to repay such advances, together
with any interest thereon and unpaid Commitment Fee, or other
charges as provided herein, and the balance, if any, shall be
applied in payment of any installment of interest, Commitment Fee
or principal then due and payable. Amounts due on this Note shall
be payable, without any counterclaim, set off or deduction
whatsoever, at the office of Lender or its agent or designee at the
address set forth on the first page of this Note or at such other
place as Lender or its agent or designee may from time to time
designate in writing. Except for payments of PIK Amount payments
that are to be paid in kind as provided in Section 7(a) above, all
amounts due under this Note, including, without limitation,
Interest, Commitment Fee and the principal amount, shall be due and
payable in immediately available funds in lawful money of the
United States. To the extent that Borrower makes a payment or
Lender receives any payment or proceeds for Borrower’s
benefit, which are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause,
then, to such extent, the obligations of Borrower hereunder
intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by Lender.
8. Remedies Upon Borrower Event of
Default. If any Borrower Event of Default occurs and is
continuing, the Lender may take any or all of the following
actions:
(a) declare
the commitment of the Lender to make Advances to be terminated,
whereupon such commitment and obligation shall be
terminated;
(b) declare
the unpaid principal amount of the outstanding Loan, all interest
accrued and unpaid thereon, all accrued and unpaid Commitment Fee,
and all other amounts owing or payable hereunder to be immediately
due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the
Borrower; and/or
(c) exercise
all rights and remedies available to it under this Note or
applicable law.
9. Remedies Upon
Lender Event of Default. If any Lender Event of Default occurs and
is not cured within 10 business days, either (a) Borrower may
exercise all rights and remedies available to it under this Note or
applicable law or (b) in the event the UCC Designee (as defined in
the Litigation Trust Agreement) exercises the Exercise of the UCC
Option, the Borrower shall have no rights or remedies under
contract, law, equity or otherwise resulting from the failure to
make an Advance.
10. Waivers. Borrower and all
sureties, endorsers, guarantors and other parties ever liable for
payment of any sums payable pursuant to the terms of this Note,
jointly and severally waive demand, presentment for payment,
protest and demand, notice of protest, notice of acceleration,
notice of intent to accelerate, diligence in collection, the
bringing of any suit against any party, and any notice of or
defense on account of any extensions, renewals, partial payment or
changes in this Note or in any of its terms, provisions, and
covenants, or any releases or substitutions of any security, or any
delay, indulgence, or other act of any trustee or any holder
hereof, whether before or after the Maturity Date, other than for
any demands or notices required to be provided pursuant
hereto.
11. Governing Law; Waiver of Jury
Trial. This Note shall be governed by, and construed in
accordance with, the laws of the State of New York. BORROWER HEREBY
WAIVES, AND LENDER, BY LENDER’S ACCEPTANCE OF THIS NOTE,
HEREBY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT IN CONNECTION WITH THIS NOTE, WHICH WAIVER IS INFORMED AND
VOLUNTARY.
12. Transfer. This Note may be
transferred in accordance with this Section 11. The Borrower shall
maintain a register (the “Register”) for the recordation of
the names and addresses of the Lender and the assignees of the
Lender and the aggregate outstanding principal amount of the Note
(and stated interest thereon and Commitment Fee) (the
“Registered
Note”). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error. The
Registered Note may be assigned or transferred in whole or in part
only by registration of such assignment or transfer on the Register
and with the consent of the Borrower, which consent shall not be
unreasonably withheld. The Borrower and the Lender (and any
assignee of a lender) shall treat each person whose name is
recorded in the Register as a lender hereunder for all purposes of
this Note, including, without limitation, the right to receive
payments of principal, Commitment Fee and interest hereunder. The
Register shall be available for inspection by the Lender and its
assignees at any reasonable time and from time to time upon
reasonable prior notice.
13. Miscellaneous.
(a) Costs.
If, and as often as, this Note is referred to an attorney for the
collection of any sum payable hereunder or the collection of any
Advance required to be made hereunder, or to defend or enforce any
of Lender’s or Borrower’s rights hereunder, or to
commence an action, cross-claim, third-party claim or counterclaim
relating to this Note, the prevailing party shall be entitled to
all actual third party costs and expenses incurred in connection
therewith including reasonable attorney’s fees (including
such fees incurred in appellate, bankruptcy or insolvency
proceedings), with or without the institution of any action or
proceeding, and in addition, all costs, disbursements and
allowances provided by law.
(b) Modification.
Neither this Note nor any of the terms hereof may be terminated,
amended, supplemented, waived or modified orally, but only by an
instrument in writing executed by the party against which
enforcement of the termination, amendment, supplement, waiver or
modification is sought.
(c) Successors.
As used herein, the terms “Borrower” and “Lender” shall be deemed to include
their respective successors and assigns whether by voluntary action
of the parties or by operation of law. All of the rights,
privileges and obligations hereof shall inure to the benefit of and
bind such successors and assigns.
(d) Notices.
All notices, certificates, demands, requests, approvals, consents,
waivers and other communications provided for herein shall be in
writing and (i) mailed (registered or certified mail, return
receipt requested, and postage prepaid), (ii) hand-delivered, with
signed receipt, or (iii) sent by nationally-recognized overnight
courier to the address set forth in the introductory paragraph of
this Note and/or to such other address as such party may from time
to time by written notice designate to the other.
[Signature
to follow]
IN
WITNESS WHEREOF, the parties have executed this Note as of the date
first set forth above.
[
]
Name:
Title
[
]
Name:
Title
EXHIBIT A
ADVANCES AND PAYMENTS ON THE LOAN
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Amount ofAdvance
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Amount ofPrincipal Paid
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Aggregate UnpaidPrincipal Amount
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