INVESTOR RIGHTS AGREEMENT

 

This Investor Rights Agreement (this “Agreement”) is entered into as of July 2,
2019, by and between FTE Networks, Inc., a Nevada corporation (the “Company”),
on the one hand, and Lateral Juscom Feeder LLC, a Delaware limited liability
company (“Lateral”), on the other hand. Each of the Company and Lateral are a
“Party” and, collectively, the “Parties.”

 

RECITALS

 

WHEREAS, as of the date hereof, Lateral beneficially owns 7,366,938 shares of
the common stock, par value $0.001 per share (the “Common Shares”), of the
Company, or approximately 25% of the Common Shares issued and outstanding on the
date hereof, including (i) 1,500,000 Common Shares delivered by the Company to
Lateral on the date hereof, (ii) 1,586,865 Common Shares underlying Series A-1
Warrants, pursuant to that certain Series A-1 Warrant Agreement, dated as of the
date hereof (the “Series A Warrant Agreement”), and (iii) 1,586,865 Series A-2
Warrants, pursuant to that certain Series A-2 Warrant Agreement, dated as of the
date hereof (the “Series A-2 Warrant Agreement”), each to purchase one Common
Share at a price of $3.00 per share, in each case on the terms and conditions
set forth in the Series A-1 Warrant Agreement and Series A-1 Warrant Agreement,
as applicable;

 

WHEREAS, prior to the date hereof, Luisa Ingargiola, Christopher Ferguson,
Patrick O’Hare and Brad Mitchell resigned from the Board of Directors of the
Company (the “Board of Directors”);

 

WHEREAS, as of the date hereof, the Company and Lateral are each party to that
certain Amended and Restated Credit Agreement, dated as of July 2, 2019 (as may
be amended, modified and/or restated from time to time) among Jus-Com, Inc., an
Indiana corporation, the Company, Benchmark Builders, Inc., a New York
corporation, the other Credit Parties thereto, the lenders party thereto, and
Lateral Juscom Feeder LLC, as administrative agent (the “Credit Agreement”),
pursuant to which Lateral has loaned to the Company $49,502,530.21 (plus accrued
interest) as of the date hereof; and

 

WHEREAS, the Company has agreed to execute an agreement providing certain
director nominations and other governance rights, as set forth herein.

 

NOW, THEREFORE, the Parties agree as follows:

 

1. Board Composition.

 

(a) Board Composition. Within 60 days of the execution of this Agreement, the
Company, acting through the Board of Directors and all applicable committees of
the Board of Directors, will use reasonable best efforts to take all necessary
actions (including by increasing the size of the Board of Directors) to cause
the Board of Directors to be comprised of seven directors, (i) one of whom shall
be Mr. Fred Sacramone, (ii) one of whom shall be designated by Lateral (the
“Lateral Director”) and (iii) five of whom shall be independent directors
reasonably acceptable to Lateral, and whom shall initially include Mr. James
Shiah (each, an “Independent Director”). Each Director shall, in the good faith
judgment of the Governance Committee of the Board of Directors, satisfy the
Director Criteria (as defined below), except that Mr. Sacramone and the Lateral
Director may fail to qualify as “independent” within the meaning of the
NYSE-American listing standards (or the applicable requirements of such other
national securities exchange on which the Common Shares are then listed for
trading).

 

   

 

 

(b) Lateral Board Representation. Subject to the terms and conditions of this
Agreement, the Company, acting through the Board of Directors and all applicable
committees of the Board of Directors, shall take all necessary action such that,
with respect to each meeting of shareholders at which directors are to be
elected, there shall be included in the slate of nominees recommended by the
Board of Directors for election as a director the individual designated by
Lateral that, if elected, will result in Lateral having one Lateral Director
serving on the Board of Directors; provided, that the Company’s obligations and
Lateral’s rights under this Section 1 shall terminate upon the later of (i)
repayment in full of all indebtedness owed under the Credit Agreement and (ii)
Lateral ceasing to beneficially own at least 10.0% of the Common Shares on a
fully diluted basis at such time (such later date, the “Termination Date”).

 

(c) Resignation. Upon termination of Lateral’s right to appoint the Lateral
Director as provide for in Section 1(b), Lateral shall take all necessary action
to cause the Lateral Director to tender his or her resignation.

 

(d) Lateral Vacancy. Except as provided in Section 1(b), prior to the
Termination Date, (i) Lateral shall have the exclusive right to remove its
designee from the Board of Directors, and the Company shall take all necessary
action to cause the removal of any such designee at the request of Lateral and
(ii) Lateral shall have the exclusive right to designate for election to the
Board of Directors a director to fill the vacancy created by reason of death,
removal or resignation of its designee to the Board of Directors, and the
Company shall take all necessary action to cause any such vacancy to be filled
by a replacement director designated by Lateral as promptly as reasonably
practicable.

 

(e) Independent Director Vacancy. In the event that there is a vacancy on the
Board of Directors created by reason of death, removal or resignation of an
Independent Director prior to the repayment in full of all indebtedness owed
under the Credit Agreement, the Company shall take all necessary action to cause
any such vacancy to be filled by a replacement director reasonably acceptable to
Lateral.

 

(f) Board Size. For so long as Lateral has the right to designate a director for
nomination under this Agreement and subject to applicable laws and stock
exchange regulations, the Company will take all necessary action to ensure that
the number of directors serving on the Board of Directors shall not exceed
seven, except with the prior consent of Lateral.

 

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(g) Committees. Subject to applicable laws and stock exchange regulations,
Lateral shall have the right to have a representative appointed to serve on each
committee of the Board of Directors for so long as Lateral has the right to
designate a director for election to the Board of Directors. Subject to
applicable laws and stock exchange regulations, Lateral shall have the right to
have a representative appointed as an observer to any committee of the Board of
Directors to which Lateral (i) does not elect or is not permitted under this
Agreement to have a representative appointed or (ii) is prohibited by applicable
laws or stock exchange regulations from having a representative appointed, in
each case for so long as Lateral has the right to designate a director for
nomination under this Agreement.

 

(h) Rights and Benefits. The Lateral Director will be entitled to the same
director benefits as other members of the Board of Directors, including (i)
compensation for his or her service as a director and reimbursement for his or
her expenses on the same basis as all other non-employee directors of the
Company, (ii) equity-based compensation grants and other benefits on the same
basis as all other non-employee directors of the Company and (iii) the same
rights of indemnification and directors’ and officers’ liability insurance
coverage as the other non-employee directors of the Company, as such rights may
exist from time to time; provided that in the event that the Lateral Director is
an employee of Lateral Investment Management, LLC or its affiliates, the Lateral
Director shall not be entitled to compensation (including equity-based
compensation grants or other benefits) with respect to his or her service as a
member of the Board of Directors or any committee thereof.

 

(i) Executive Committees. For so long as Lateral has the right to nominate or
appoint a director for election to the Board of Directors under this Agreement,
the Company agrees that it will not form new committees or subcommittees of the
Board of Directors unless such committee is formed for a specific purpose such
as reviewing a transaction or proposed transaction, investigating alleged
misconduct or a possible claim, in which event such committee will be composed
of such directors as the Board of Directors determines in good faith, after
consultation with counsel in a meeting in which all directors are invited to
participate, would be best suited in the circumstances.

 

(j) Director Criteria. The Company’s obligations to nominate or appoint the
Lateral Director under this Agreement shall be subject to a good faith
determination by the Governance Committee of the Board of Directors that such
individual fulfills the Director Criteria. For purposes of this Agreement,
satisfaction of the “Director Criteria”shall mean that the individual in
question (i) is reasonably acceptable to the Board of Directors in the exercise
of their fiduciary duties, (ii) is “independent” within the meaning of the NYSE
American listing standards (or applicable requirements of such other national
securities exchange designated as the primary market on which the Common Shares
are then listed for trading), and (iii) meets the Company’s publicly disclosed
guidelines and policies with respect to service on the Board of Directors as in
effect at any relevant time.

 

2. Additional Agreements.

 

(a) Prior to any applicable nomination or appointment under this Agreement, any
prospective Lateral Director shall submit to the Company an accurately completed
copy of the Company’s standard director and officer questionnaire and an
executed authorization form to conduct a background check, as requested by the
Company in connection with the appointment or election of new members of the
Board of Directors.

 

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(b) Lateral agrees that the Board of Directors or any committee thereof, in the
exercise of its fiduciary duties, may cause (A) any director who is nominated by
Lateral or any Board or committee observer appointed by Lateral to recuse
himself or herself from any Board or committee meeting or portion thereof at
which the Board of Directors or any such committee is evaluating and/or taking
action with respect to (i) the exercise of any of the Company’s rights or
enforcement of any of the obligations under this Agreement, (ii) any action
taken in response to actions taken or proposed by Lateral or its respective
Affiliates or Associates with respect to the Company, or (iii) any proposed
transaction between the Company and Lateral or its Affiliates or Associates or
(B) any Board or committee observer appointed by Lateral to recuse himself or
herself from any Board or committee meeting to the extent that a majority of the
members of the Board of Directors believe in good faith after consultation with
counsel that such exclusion is necessary in order to preserve any
attorney-client privilege, attorney-work product privilege or other similar
legal privilege or such attendance is otherwise prohibited by applicable law.

 

(c) So long as Lateral has any director nominee on the Board of Directors or
Board observer participating in meetings of the Board of Directors or any
committee thereof, Lateral and any such director or observer shall be bound by,
and shall observe and comply with, any corporate governance guidelines, codes of
conduct or ethics, insider trading policy, public disclosure policy, related
person policy and other governance policies the Board of Directors shall from
time to time adopt and as shall be applicable to other directors of the Company.

 

(d) Lateral agrees that prior to December 31, 2019, it shall not transfer any of
its Common Shares to any person other than its affiliates or another lender
under the Credit Agreement.

 

3. Representations and Warranties.

 

(a) Lateral, severally and not jointly, represents and warrants to the Company
that: (i) the authorized signatory of Lateral set forth on the signature page
hereto has the power and authority to execute this Agreement and any other
documents or agreements to be entered into in connection with this Agreement and
to bind Lateral thereto; (ii) this Agreement has been duly authorized, executed
and delivered by Lateral, and is a valid and binding obligation of Lateral,
enforceable against it in accordance with its terms, except as enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws generally affecting the rights
of creditors and subject to general equity principles; (iii) the execution of
this Agreement, the consummation of any of the transactions contemplated hereby,
and the fulfillment of the terms hereof, in each case in accordance with the
terms hereof, will not conflict with, or result in a breach or violation of the
organizational documents of Lateral as currently in effect; (iv) the execution,
delivery and performance of this Agreement by Lateral does not and will not (A)
violate or conflict with any law, rule, regulation, order, judgment or decree
applicable to it, or (B) result in any breach or violation of or constitute a
default (or an event which with notice or lapse of time or both would constitute
such a breach, violation or default) under or pursuant to, or result in the loss
of a material benefit under, or give any right of termination, amendment,
acceleration or cancellation of, any organizational document, agreement,
contract, commitment, understanding or arrangement to which it is a party or by
which it is bound; (v) as of the date of this Agreement, Lateral’s ownership of
Common Shares is as set out in this Agreement; and (vi) as of the date hereof,
other than the Issuance Transaction or as otherwise disclosed in this Agreement,
Lateral does not currently have, and does not currently have any right to
acquire, any interest in any other securities of the Company (or any rights,
options or other securities convertible into or exercisable or exchangeable
(whether or not convertible, exercisable or exchangeable immediately or only
after the passage of time or the occurrence of a specified event) for such
securities or any obligations measured by the price or value of any securities
of the Company or any of its controlled Affiliates, including any swaps or other
derivative arrangements designed to produce economic benefits and risks that
correspond to the ownership of Common Shares, whether or not any of the
foregoing would give rise to beneficial ownership, and whether or not to be
settled by delivery of Common Shares, payment of cash or by other consideration,
and without regard to any short position under any such contract or
arrangement).

 

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(b) The Company represents and warrants to Lateral that: (i) the authorized
signatory of the Company set forth on the signature page hereto has the power
and authority to execute this Agreement and any other documents or agreements to
be entered into in connection with this Agreement and to bind the Company
thereto; (ii) this Agreement has been duly authorized, executed and delivered by
the Company, and is a valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws generally affecting the rights of
creditors and subject to general equity principles; (iii) the execution of this
Agreement, the consummation of any of the transactions contemplated hereby, and
the fulfillment of the terms hereof, in each case in accordance with the terms
hereof, will not conflict with, or result in a breach or violation of the
organizational documents of the Company as currently in effect; (iv) the
execution, delivery and performance of this Agreement by the Company does not
and will not (A) violate or conflict with any law, rule, regulation, order,
judgment or decree applicable to it, or (B) result in any breach or violation of
or constitute a default (or an event which with notice or lapse of time or both
would constitute such a breach, violation or default) under or pursuant to, or
result in the loss of a material benefit under, or give any right of
termination, amendment, acceleration or cancellation of, any organizational
document, agreement, contract, commitment, understanding or arrangement to which
it is a party or by which it is bound.

 

4. SEC Filings.

 

(a) Promptly and in any event no later than four business days following the
date of this Agreement, the Company will file with the SEC a Current Report on
Form 8-K reporting its entry into this Agreement, disclosing applicable items to
conform to its obligations under this Agreement and appending this Agreement as
an exhibit (the “Form 8-K”). The Company will provide Lateral and their legal
counsel with a reasonable opportunity to review and comment on the Form 8-K
prior to the filing with the SEC and consider in good faith any comments of
Lateral.

 

(b) Promptly and in any event no later than two business days following the date
of this Agreement, Lateral will file with the SEC an amendment to its Schedule
13D in compliance with Section 13 of the Exchange Act reporting their entry into
this Agreement, disclosing applicable items to conform to its obligations under
this Agreement and appending this Agreement as an exhibit (the “Schedule 13D
Amendment”). Lateral will provide the Company and its legal counsel with a
reasonable opportunity to review the Schedule 13D Amendment prior to it being
filed with the SEC and consider in good faith any comments of the Company.

 

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5. Non-Disparagement. Subject to applicable law, Lateral covenants and agrees
that, for so long as Lateral has the right to designate a director for election
to the Board of Directors under this Agreement, or if earlier, until such time
as the other Party or any of its agents, subsidiaries, affiliates, successors,
assigns, officers, key employees or directors shall have breached this Section
6, neither Lateral nor any of its respective Affiliates or designated
spokespersons shall in any way publicly disparage any other Party or such other
Party’s Affiliates (including any current officer of a Party or a Party’s
subsidiaries who no longer serves in such capacity following the execution of
this Agreement), directors (including any current director of a Party or a
Party’s subsidiaries who no longer serves in such capacity following the
execution of this Agreement), officers, attorneys or representatives, or any of
their businesses, products or services, in a manner that would reasonably be
expected to damage the business or reputation of such other Party.
Notwithstanding the foregoing, any statements made in any action, suit or
proceeding or regarding a Party’s operational or financial performance or any
strategy, plans or proposals not supported by the other Party (“Opposition
Statements”) will not be deemed to be a breach of this Section 6 (subject to,
for the avoidance of doubt, any obligations of confidentiality that a member of
the Board of Directors may otherwise have), it being understood that if any
Opposition Statement is made by a Party, the other Party will be permitted to
publicly respond as it determines in good faith to be appropriate. This Section
6 will not apply to any statement made in connection with any action to enforce
this Agreement.

 

6. Specific Performance. Each of Lateral, on the one hand, and the Company, on
the other hand, acknowledges and agrees that irreparable injury to the other
Party would occur in the event any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached and
that such injury would not be adequately compensable by the remedies available
at law (including the payment of money damages). It is accordingly agreed that
each party (as applicable, the “Moving Party”), will each be entitled to
specific enforcement of, and injunctive relief to prevent any violation of, the
terms hereof, and the other Party will not take action, directly or indirectly,
in opposition to the Moving Party seeking such relief on the grounds that any
other remedy or relief is available at law. This Section 7 is not the exclusive
remedy for any violation of this Agreement.

 

7. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the Parties that the Parties would have executed
the remaining terms, provisions, covenants and restrictions without including
any of such which may be hereafter declared invalid, void or unenforceable. In
addition, the Parties agree to use their reasonable best efforts to agree upon
and substitute a valid and enforceable term, provision, covenant or restriction
for any of such that is held invalid, void or enforceable by a court of
competent jurisdiction.

 

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8. Notices. Any notices, consents, determinations, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (a) upon
receipt, when delivered personally, (b) upon confirmation of receipt, when sent
by email (provided such confirmation is not automatically generated), or (c) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the Party to receive the same. The
addresses and emails for such communications:

 

If to the Company:

 

FTE Networks, Inc.

 

237 West 35th Street, Suite 806

New York, NY 10001

Attention: General Counsel

Email: pamcfillin@ftenet.com

 

with a copy (which will not constitute notice) to:

 

K&L Gates

Southeast Financial Center, Suite 3900

200 South Biscayne Boulevard

Miami, Florida 33131-2399

Attention: Clayton E. Parker

Email: clayton.parker@klgates.com

 

If to Lateral:

 

Lateral Investment Management, LLC

400 South El Camino Real, Suite 1100,

San Mateo, CA 94402

650-396-2200

Attention: Dhamitha Richard de Silva, Managing Partner

Email: Rd@lateralim.com

 

with a copy (which will not constitute notice) to

 

King & Spalding LLP

1185 Avenue of the Americas

New York, NY 10036

Attention: Kevin E. Manz

Email: kmanz@kslaw.com

 

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9. Applicable Law. This Agreement will be governed by and construed and enforced
in accordance with the laws of the State of New York without reference to the
conflict of laws principles thereof. Each of the Parties irrevocably agrees that
any legal action or proceeding with respect to this Agreement and the rights and
obligations arising hereunder, or for recognition and enforcement of any
judgment in respect of this Agreement and the rights and obligations arising
hereunder brought by another Party or its successors or assigns, will be brought
and determined exclusively in the courts of the State of New York (or, if a New
York state court declines to accept jurisdiction over a particular matter, any
federal court within the Southern District of New York). Each of the Parties
hereby irrevocably submits with regard to any such action or proceeding for
itself and in respect of its property, generally and unconditionally, to the
personal jurisdiction of the aforesaid courts and agrees that it will not bring
any action relating to this Agreement in any court other than the aforesaid
courts. Each of the Parties hereby irrevocably waives, and agrees not to assert
in any action or proceeding with respect to this Agreement, (a) any claim that
it is not personally subject to the jurisdiction of the above-named courts for
any reason, (b) any claim that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable legal requirements, any
claim that (i) the suit, action or proceeding in such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper, or (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.

 

10. Counterparts. This Agreement may be executed in two or more textually
identical counterparts, each of which will be considered one and the same
agreement and will become effective when counterparts have been signed by each
of the Parties and delivered to the other Party (including by means of
electronic delivery or facsimile).

 

11. Confidentiality. Any director of the Company who is an employee of Lateral,
if he or she wishes to do so, subject to Section 12, may provide confidential
information of the Company that such director learns in his or her capacity as a
director of the Company, including discussions or matters considered in meetings
of the Board of Directors or committees of the Board of Directors (collectively,
“Company Confidential Information”), to Lateral, its controlled Affiliates and
Associates and legal counsel (collectively, “Lateral Representatives”), in each
case solely to the extent that such Lateral Representatives need to know such
information in connection with Lateral’s investment in the Company; provided,
however, that such director (a) will inform such Lateral Representatives of the
confidential nature of any such Company Confidential Information and (b) will
instruct such Lateral Representatives to refrain from disclosing such Company
Confidential Information to anyone (whether to any company in which Lateral has
an investment or otherwise), by any means, or otherwise from using the
information in any way other than in connection with Lateral’s investment in the
Company. Lateral will be responsible for maintaining the continuing
confidentiality of Company Confidential Information and compliance with Section
12.

 

12. Securities Laws. Lateral acknowledges that it is aware, and will advise each
of its representatives who are informed as to the matters that are the subject
of this Agreement, that the United States securities laws may prohibit any
person who has received from an issuer material, non-public information from
purchasing or selling securities of such issuer or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.

 

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13. Entire Agreement; Amendment and Waiver; Successors and Assigns; Third Party
Beneficiaries; Term. This Agreement, the Credit Agreement, the Registration
Rights Agreement, the Series A-1 Warrant Agreement, and the Series A-2 Warrant
Agreement, together constitute the entire agreement of the Parties with respect
to the subject matter discussed herein and together supersede all prior
agreements, arrangements, or understandings, whether written or oral, between
the parties with respect to the transactions contemplated hereby. No
modifications of this Agreement can be made except in writing signed by an
authorized representative of each Party. No failure on the part of any Party to
exercise, and no delay in exercising, any right, power or remedy hereunder will
operate as a waiver thereof, nor will any single or partial exercise of such
right, power or remedy by such Party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. The terms and conditions of this Agreement will be binding upon, inure to
the benefit of, and be enforceable by the Parties and their respective
successors, heirs, executors, legal representatives, and permitted assigns. No
Party will assign or delegate this Agreement or any rights or obligations
hereunder without, with respect to Lateral, the prior written consent of the
Company, and with respect to the Company, the prior written consent of Lateral.
This Agreement is solely for the benefit of the Parties and is not enforceable
by any other persons or entities. This Agreement will terminate upon such time
as Lateral no longer has the right to designate a director for election to the
Board of Directors under this Agreement, except the provisions of this Section
13 hereof, which will survive such termination, and no termination of this
Agreement will relieve a person from any liability for any prior breach.

 

14. Interpretation. When a reference is made in this Agreement to “Sections,” or
“Exhibits,” such reference shall be to a Section of or Exhibit to this Agreement
unless otherwise indicated. Defined terms used but not otherwise defined herein
shall have their respective meanings set forth in the Credit Agreement. The
terms defined in the singular have a comparable meaning when used in the plural,
and vice versa. The headings contained in this Agreement are for reference
purposes only and are not part of this Agreement. Whenever the words “include,”
“includes” or “including” are used in this Agreement, they shall be deemed
followed by the words “without limitation.” No rule of construction against the
draftsperson shall be applied in connection with the interpretation or
enforcement of this Agreement, as this Agreement is the product of negotiation
between sophisticated parties advised by counsel. All references to “$” or
“dollars” mean the lawful currency of the United States of America. Except as
expressly stated in this Agreement, all references to any statute, rule or
regulation are to the statute, rule or regulation as amended, modified,
supplemented or replaced from time to time (and, in the case of statutes,
include any rules and regulations promulgated under the statute) and to any
section of any statute, rule or regulation include any successor to the section.
Whenever the words “hereof”, “hereby”, “herein” and “hereunder” and words of
like import are used in this Agreement, they shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized signatories of the Parties as of the date first indicated above.

 

  FTE NETWORKS, INC.       By:                                    Name:    
Title:           Lateral Juscom Feeder LLC         By:     Name:     Title:  

 

[Signature Page to Investor Rights Agreement]