Document:

Blueprint

COMMON STOCK PURCHASE AGREEMENT

 

This
Common Stock Purchase Agreement (this “Agreement”) is made as of May 4,
2018, by and among FUSION
CONNECT, INC., f/k/a Fusion Telecommunications
International, Inc., a Delaware corporation with its principal
office at 420 Lexington Avenue, Suite 1718, New York, New York
10170 (the “Company”), and
___________________ (the “Purchaser”).

 

Recitals

 

A.           The
Company has authorized the sale and issuance of _________ shares
(the “Shares”
or “Securities”) of the common stock
of the Company, $0.01 par value per share (the “Common Stock”), to the Purchaser
in a private placement (the “Offering”).

 

B.           Pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506(b) promulgated thereunder, the
Company desires to sell to the Purchaser, and the Purchaser desires
to purchase from the Company the Shares on the terms and subject to
the conditions set forth in this Agreement.

 

Terms and Conditions

 

Now,
therefore, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties,
intending to be legally bound, do hereby agree as
follows:

 

1.            

Purchase
of the Securities.

 

1.1           Agreement
to Sell and Purchase. At the Closing (as hereinafter
defined), the Company will issue and sell to the Purchaser, and the
Purchaser will purchase from the Company, the Shares for an
aggregate purchase price of $___________ (the “Purchase Price”) or $5.25 for
each Share.

 

1.2           Closing;
Closing Date. The completion of the sale and purchase of the
Shares (the “Closing”) shall be held
simultaneously with the execution of this Agreement, or at such
other time as the Company and the Purchaser may agree (the
“Closing
Date”).

 

1.3           Delivery
of the Shares. At the Closing, subject to the terms and
conditions hereof, the Company will deliver to the Purchaser a
stock certificate or certificates, in such denominations and
registered in such name(s) as the Purchaser may designate by notice
to the Company, representing the Securities, or at the
Purchaser’s request, a statement or other written evidence
that the Securities issuable to the Purchaser have been issued and
are held in book entry form at the Company’s transfer agent,
in either case dated as of the Closing Date (each such certificate
and each such book entry position are hereinafter referred to as a
“Certificate”),
against payment of the Purchase Price in cash in the form of a wire
transfer, unless other means of payment shall have been agreed upon
by the Purchaser and the Company. 

 

2.            

Representations and Warranties of the
Company. The Company hereby represents and warrants to the
Purchaser, after giving effect (unless otherwise specified below)
to the consummation of the merger between Fusion BCHI Acquisition
LLC, a Delaware limited liability company and a wholly-owned
subsidiary of the Company, with Birch Communications Holdings,
Inc. and the transactions related thereto being consummated
substantially simultaneously with this Offering (the
“Merger”):

 

 

 

 

 

 

2.1           Authorization.
All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, has been taken. The
Company has the requisite corporate power to enter into this
Agreement and carry out and perform its obligations under this
Agreement. At the Closing, the Company will have the requisite
corporate power to issue and sell the Securities. This Agreement
has been duly authorized, executed and delivered by the Company
and, upon due execution and delivery by the Purchaser, this
Agreement will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except as rights to indemnity hereunder may be limited by federal
or state securities laws and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally or by
equitable principles.

 

2.2           No
Conflict with Other Instruments. The execution, delivery and
performance of this Agreement, the issuance and sale of the
Securities to be sold by the Company hereunder and the consummation
of the actions contemplated by this Agreement will not (A) result
in any violation of, be in conflict with, or constitute a default
under, with or without the passage of time or the giving of notice:
(i) any provision of the Company’s charter documents as in
effect on the date hereof or at the Closing; (ii) any provision of
any judgment, arbitration ruling, decree or order to which the
Company or its subsidiaries are a party or by which they are bound;
(iii) any bond, debenture, note or other evidence of indebtedness,
or any lease, contract, mortgage, indenture, deed of trust, loan
agreement, joint venture or other agreement, instrument or
commitment to which the Company or any subsidiary is a party or by
which they or their respective properties are bound; or (iv) any
statute, rule, law or governmental regulation or order applicable
to the Company or any of its subsidiaries, except, in the case of
(ii), (iii) and (iv) above, as would not reasonably be expected to
have a Material Adverse Effect (as hereinafter defined); or (B)
result in the creation or imposition of any lien, encumbrance,
claim, security interest or restriction whatsoever upon any of the
properties or assets of the Company or any subsidiary or any
acceleration of indebtedness pursuant to any obligation, agreement
or condition contained in any bond, debenture, note or any other
evidence of indebtedness or any indenture, mortgage, deed of trust
or any other agreement or instrument to which the Company or any
subsidiary are a party or by which they are bound or to which any
of the property or assets of the Company or any subsidiary is
subject. No consent, approval, authorization or other order of, or
registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body is required for
the execution and delivery of this Agreement by the Company and the
valid issuance or sale of the Securities by the Company pursuant to
this Agreement, other than such as have been made or obtained and
that remain in full force and effect, and except for the filing of
a Form D or any filings required to be made under state securities
laws.

 

2.3           Certificate
of Incorporation; Bylaws. The Company has made available to
the Purchaser true, correct and complete copies of the Certificate
of Incorporation and Bylaws of the Company, as in effect on the
date hereof.

 

2.4           Organization,
Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now
conducted. The Company and each of its subsidiaries has full power
and authority to own, operate and occupy its properties and to
conduct its business as presently conducted and is duly qualified
to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would not reasonably be expected
to have a material adverse effect on its or its subsidiaries’
business, financial condition, properties, operations, prospects or
assets or its ability to perform its obligations under this
Agreement (a “Material
Adverse Effect”). 

 

 

 

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2.5           SEC
Filings; Financial Statements. As used herein, the
“Company SEC
Documents” means all reports, schedules, forms,
statements and other documents filed or furnished, as applicable,
by the Company under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), including pursuant to Section 13(a) or 15(d)
thereof, including the exhibits thereto and documents incorporated
by reference therein. The Company has filed all SEC Documents as
required on a timely basis and as of their respective filing dates
during the 12 months preceding the date hereof; the Company SEC
Documents since December 31, 2015 complied in all material respects
with the requirements of the Exchange Act and the rules and
regulations of the Securities and Exchange Commission (the
“SEC”)
promulgated thereunder; and none of these Company SEC Documents,
when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made not misleading. The
consolidated financial statements contained in the Company SEC
Documents since December 31, 2017: (i) complied in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
covered, except in the case of unaudited statements as permitted by
Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end
audit adjustments; and (iii) fairly present the consolidated
financial position of the Company and its subsidiaries as of the
respective dates thereof and the consolidated results of operations
cash flows and the changes in shareholders’ equity of the
Company and its subsidiaries for the periods covered
thereby.

 

2.6           Capitalization.
The authorized capital stock of the Company, consists of (i)
150,000,000 shares of Common Stock, of which (A) 76,583,701 shares
were issued and outstanding as of the date of this Agreement, and
(B) 8,526,403 shares were reserved for issuance upon the exercise
or conversion, as the case may be, of outstanding options, warrants
or other convertible securities as of the date of this Agreement,
in each case, taking into account the reverse split of the Common
Stock that was effected on the date hereof and acknowledging
rounding adjustments for fractional split amounts; and (ii)
10,000,000 shares of preferred stock, of which 15,000 will be
issued and outstanding as of the date of this Agreement. All issued
and outstanding shares of capital stock have been duly authorized
and validly issued, are fully paid and non-assessable, have been
issued and sold in compliance with the registration requirements of
the federal and state securities laws or the applicable statutes of
limitation have expired, and were not issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. Except as set forth herein, in Schedule 2.6 or in the Company
SEC Documents or as contemplated by the Agreement and Plan of
Merger (the “Merger
Agreement”) relating to the Merger that is being
consummated contemporaneously with this Offering, there are no (i)
outstanding rights (including, without limitation, preemptive
rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any unissued shares of capital stock or
other equity interest in the Company, or any contract, commitment,
agreement, understanding or arrangement of any kind to which the
Company or any subsidiary is a party and relating to the issuance
or sale of any capital stock or convertible or exchangeable
security of the Company or any subsidiary, other than 1,996,754
options granted to directors and employees of the Company and its
subsidiaries pursuant to its 1998 Stock Option Plan, 2009 Stock
Option Plan or the 2016 Equity Incentive Plan and 1,193,070
warrants that are issued and outstanding; or (ii) obligations of
the Company to purchase redeem or otherwise acquire any of its
outstanding capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof. Except
as disclosed in the Company SEC Documents and as contemplated by
(i) the Merger Agreement, (ii) the Company’s announced
agreement to acquire, through a merger, a specified target company
(the “Acquisition
Agreement”), and (iii) the Company’s Series D
preferred stock, there are no anti-dilution or price adjustment
provisions, co-sale rights, registration rights, rights of first
refusal or other similar rights contained in the terms governing
any outstanding security of the Company that will be triggered by
the issuance of the Securities and no person has any right to cause
the Company to effect the registration under the Securities Act of
any securities of the Company (other than the rights which have
been granted (i) in connection with this Agreement, the Merger
Agreement and the Acquisition Agreement). 

 

 

 

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2.7           Subsidiaries.
Except as contemplated by the Merger Agreement and except as set
forth in the Company SEC Documents, the Company does not presently
own or control, directly or indirectly, and has no stock or other
interest as owner or principal in, any other corporation or
partnership, joint venture, association or other business venture
or entity (each a “subsidiary”). Each subsidiary is
duly incorporated or organized, validly existing and, if applicable
to the jurisdiction, in good standing under the laws of its
jurisdiction of incorporation or organization and has all requisite
power and authority to carry on its business as now conducted. Each
subsidiary is duly qualified to transact business and is in good
standing in each jurisdiction, except where the failure to be so
qualified or in good standing would not have a Material Adverse
Effect. All of the outstanding capital stock or other securities of
each subsidiary of the Company is owned, either directly or
indirectly by the Company). Except for the liens granted under the
terms of the First Lien Credit Facility (as defined below) and the
Second Lien Credit Facility (as defined below), the capital stock
or other securities of each US subsidiary of the Company is free
and clear of any liens, claims or encumbrances.

 

2.8           Valid
Issuance of Securities. The Securities are duly authorized
and, when issued, sold and delivered and paid for in accordance
with the terms hereof will be duly and validly authorized and
issued, fully paid and non-assessable, free from all taxes, liens,
claims, encumbrances and charges with respect to the issue thereof;
provided, however, that the Securities will be subject to
restrictions on transfer under state and/or federal securities laws
or as otherwise set forth herein. The issuance, sale and delivery
of the Securities in accordance with the terms hereof will not be
subject to preemptive rights of shareholders of the
Company.

 

2.9           Offering.
Assuming the accuracy of the representations of the Purchaser in
Section 3.3 of this Agreement on the date hereof, the offer, issue
and sale of the Securities are and will be exempt from the
registration and prospectus delivery requirements of the Securities
Act and have been or will be registered or qualified (or are or
will be exempt from registration and qualification) under the
registration, permit or qualification requirements of all
applicable state securities laws. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that
would require registration under the Securities Act of the issuance
of the Securities to the Purchaser. Other than the Company SEC
Documents, the Company has not distributed any offering materials
in connection with the offering and sale of the Securities. The
Company has not taken any action to sell, offer for sale or solicit
offers to buy any securities of the Company which would bring the
offer, issuance or sale of the Securities within the provisions of
Section 5 of the Securities Act, unless such offer, issuance or
sale was or shall be within the exemptions of Section 4 of the
Securities Act.

 

2.10           Litigation.
Except as set forth in the Company SEC Documents or as set forth in
Schedule 2.10,
there is no litigation matter currently threatened against the
Company or any of its subsidiaries that (a) if adversely determined
would reasonably be expected to have a Material Adverse Effect or
(b) would be required to be disclosed in the Company’s Annual
Report on Form 10-K under the requirements of Item 103 of
Regulation S-K. The foregoing includes, without limitation, any
action, suit, proceeding or investigation, pending or threatened,
that questions the validity of this Agreement or the right of the
Company to enter into this Agreement and perform its obligations
hereunder. Except as set forth in Schedule 2.10, neither the
Company nor any subsidiary is subject to any injunction, judgment,
decree or order of any court, regulatory body, arbitral panel,
administrative agency, national securities exchange or other
government body. To the Company’s knowledge, there is no
proceeding or investigation by the Principal Market (as defined
below) pending that could lead to a suspension of listing or
trading of the Common Stock.

 

 

 

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2.11           Governmental
Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing
with, any federal, state, local or provincial governmental
authority on the part of the Company or any of its subsidiaries is
required in connection with the consummation of the transactions
contemplated by this Agreement, except for notices required or
permitted to be filed with the Principal Market or certain state
and federal securities commissions, which notices will be filed on
a timely basis. 

 

2.12           No
Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder’s or other fee or commission in
connection with the transactions contemplated by this Agreement
based on arrangements made by the Company, it being expressly
acknowledged that any fees payable in connection with the
consummation of the Merger substantially simultaneously with this
Offering are not fees to any broker, finder, underwriter or
placement agent for services in connection with this
Offering.

 

2.13           Compliance.
Neither the Company nor any of its subsidiaries is in violation of
its Certificate of Incorporation or Bylaws (or similar
organizational documents). The Company and its subsidiaries, and
their representatives, have been conducting their business in
compliance with all applicable laws, rules and regulations of the
jurisdictions in which they conduct business, including, without
limitation, all applicable local, state and federal environmental
laws and regulations, except where failure to be so in compliance
would not have a Material Adverse Effect. Each of the Company and
its subsidiaries has all necessary franchises, licenses, permits,
certificates and other authorizations from any foreign, federal,
state or local government or governmental agency, department or
body that are currently necessary for the operation of the business
of the Company and its subsidiaries as currently conducted, except
where the failure to currently possess such franchises, licenses,
certificates and other authorizations would not reasonably be
expected to have a Material Adverse Effect.

 

2.14           No
Material Changes. Except as disclosed in the Company SEC
Documents and except for the completion of the Merger and the entry
by the Company into a $595 million first lien credit facilities
(the “First Lien Credit
Facility”) and the $85 million second lien credit
facility (the “Second Lien
Credit Facility”) and the various
transactions contemplated by each of these credit facilities, since
December 31, 2017, there has been no material adverse change in the
assets, liabilities, business, properties, operations, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole. Since December 31, 2017, the
Company has not declared or paid any dividend or distribution on
its common stock.

 

2.15           Intellectual
Property. 

 

(a)           The
Company and each of its subsidiaries has ownership or license or
legal right to use, or can acquire on reasonable terms, all patent,
copyright, trade secret, know-how trademark, trade name customer
lists, designs, manufacturing or other processes, computer
software, systems, data compilation, research results or other
proprietary rights used in the business of the Company or such
subsidiary (collectively “Intellectual Property”), except
as such failure to own, license, use or acquire would not result in
a Material Adverse Effect.

 

(b)           The
Company and each of its subsidiaries has taken all reasonable steps
required in accordance with sound business practice and business
judgment to establish and preserve its ownership of all material
Intellectual Property with respect to their products and
technology.

 

 

 

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(c)           To
the knowledge of the Company, the present business, activities and
products of the Company and its subsidiaries do not infringe any
intellectual property of any other person, except or where such
infringement would not have a Material Adverse Effect. Except as
set forth in Schedule
2.15(c), no proceeding charging the Company or any of its
subsidiaries with infringement of any adversely held Intellectual
Property is currently pending. To the knowledge of the Company, no
other person is infringing any rights of the Company or its
subsidiaries to the Intellectual Property. 

 

(d)           Except
as set forth in Schedule
2.15(c), no proceedings are pending or, to the knowledge of
the Company, threatened, which challenge the rights of the Company
or any of its subsidiaries to the use of the Intellectual Property.
To the knowledge of the Company, the Company and each of its
subsidiaries has the right to use, free and clear of material
claims or rights of other persons, all of its customer lists,
designs, computer software, systems, data compilations, and other
information that are required for its products or its business as
presently conducted. To the knowledge of the Company, neither the
Company nor any of its subsidiaries is making unauthorized use of
any confidential information or trade secrets of any person. The
activities of any of the employees on behalf of the Company or of
any of its subsidiaries do not violate any agreements or
arrangements between such employees and third parties related to
confidential information or trade secrets of third parties or that
restrict any such employee’s engagement in business activity
of any nature.

 

(e)           All
material licenses or other agreements under which (i) the Company
or any subsidiary employs rights in Intellectual Property, or (ii)
the Company or any subsidiary has granted rights to others in
Intellectual Property owned or licensed by the Company or any
subsidiary are in full force and effect, and there is no default
(and there exists no condition which, with the passage of time or
otherwise, would constitute a default by the Company or such
subsidiary) by the Company or any subsidiary of the Company with
respect thereto.

 

2.16           Exchange
Compliance. The Company’s common stock is registered
pursuant to Section 12(b) of the Exchange Act, was immediately
prior to the date hereof listed on The Nasdaq Capital Market and as
of the date hereof is listed on The Nasdaq Global Market (the
“Principal
Market”), and the Company has taken no action designed
to, or likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act or delisting the Common
Stock (including the Shares) from the Principal Market. The Company
is in compliance with all of the presently applicable requirements
for continued listing of the Common Stock on the Principal Market.
The issuance of the Securities does not require shareholder
approval including, without limitation, pursuant to the rules and
regulations of the Principal Market.

 

2.17           Form
S-3 Eligibility. The Company is eligible to register the
Shares for resale by the Purchaser using Form S-3 promulgated under
the Securities Act.

 

2.18           Accountants.
EisnerAmper LLP, who expressed their opinion with respect to the
consolidated financial statements contained in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2017, to
be incorporated by reference into the Registration Statement (as
hereinafter defined) and the prospectus which forms a part thereof
(the “Prospectus”), have advised the
Company that they are, and to the knowledge of the Company they
are, independent accountants as required by the Securities Act and
the rules and regulations promulgated thereunder.

 

 

 

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2.19           Taxes.
The Company and each of its subsidiaries has filed all federal,
state, local and foreign income and franchise tax returns and has
paid all taxes shown as due thereon (except where the failure to
file would not have a Material Adverse Effect). The Company has set
aside on its books adequate provisions for payments of taxes as of
its reporting period. 

 

2.20           Insurance.
The Company and each of its subsidiaries maintains and will
continue to maintain insurance of the types and in the amounts that
the Company reasonably believes is adequate for its business,
including, but not limited to, insurance covering real and personal
property owned or leased by the Company and its subsidiaries
against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against by similarly situated companies,
all of which insurance is in full force and effect.

 

2.21           Transfer
Taxes. On the Closing Date, all stock transfer or other
taxes (other than income taxes) that are required to be paid in
connection with the sale and transfer of the Securities hereunder
will be, or will have been, fully paid or provided for by the
Company and the Company will have complied with all laws imposing
such taxes.

 

2.22           Investment
Company. The Company (including its subsidiaries) is not an
“investment company” or an “affiliated
person” of, or “promoter” or “principal
underwriter” for an investment company, within the meaning of
the Investment Company Act of 1940 and will not be deemed an
“investment company” as a result of the transactions
contemplated by this Agreement.

 

2.23           Related
Party Transactions. To the knowledge of the Company, no
transaction has occurred between or among the Company or any of its
affiliates (including, without limitation, any of its
subsidiaries), officers or directors or any affiliate or affiliates
of any such affiliate, officer or director that with the passage of
time will be required to be disclosed pursuant to Section 13, 14 or
15(d) of the Exchange Act other than those transactions that have
already been so disclosed in the SEC Documents and those
transactions that are in connection with, or contemplated by, the
Merger, the First Lien Credit Facility, the Second Lien Credit
Facility and the Company’s sale of Series D preferred stock
in connection with the Merger.

 

2.24           Books
and Records. The books, records and accounts of the Company
and its subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions in, and dispositions of, the assets of,
and the operations of, the Company and its
subsidiaries.

 

2.25           Disclosure
Controls and Internal Controls.

 

(a)           The
Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 under the
Exchange Act), which (i) are designed to ensure that material
information relating to the Company is made known to the
Company’s principal executive officer and its principal
financial officer by others within the Company particularly during
the periods in which the periodic reports required under the
Exchange Act are being prepared; and (ii) provide for the periodic
evaluation of the effectiveness of such disclosure controls and
procedures as of the end of the period covered by the
Company’s most recent annual or quarterly report filed with
the SEC. 

 

 

 

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(b)           The
Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets
or incurrence of liabilities is permitted only in accordance with
management’s general or specific authorization and (iv) the
recorded accountability for assets and liabilities is compared with
the existing assets and liabilities at reasonable intervals and
appropriate action is taken with respect to any difference. The
Company maintains disclosure controls and procedures (as such term
is defined in Rule 13a-14 under the Exchange Act) that are
effective in ensuring that information required to be disclosed by
the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the Company’s
management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to
allow timely decisions regarding required disclosure. The Company
is not aware of (i) any significant deficiency or material weakness
in the design or operation of its internal controls; or (ii) any
fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s or any
of its subsidiary’s internal controls. 

 

(c)           Except
as described in the Company SEC Documents, there are no material
off-balance sheet arrangements (as defined in Item 303 of
Regulation S-K), or any other relationships with unconsolidated
entities (in which the Company or its control persons have an
equity interest) that may have a material current or future effect
on the Company’s or any of its/subsidiary’s financial
condition, revenues or expenses, changes in financial condition,
results of operations, liquidity, capital expenditures or capital
resources.

 

2.26           No
General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D promulgated under the
Securities Act) in connection with the offer or sale of the
Securities.

 

2.27           Foreign
Corrupt Practices. Neither the Company nor any of its
subsidiaries nor any director, officer, agent, employee or other
person acting on behalf of the Company or any of its subsidiaries
has, in the course of its actions for, or on behalf of, the Company
(i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; (iii) violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government
official or employee.

 

2.28           Sarbanes-Oxley
Act. The Company is in compliance in all material respects
with any and all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the SEC thereunder
that are effective as of the date hereof.

 

 

 

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2.29           Employee
Relations. Neither the Company nor any of its subsidiaries
is a party to any collective bargaining agreement. The Company
reasonably believes that its and its subsidiaries’ relations
with its employees are good. Other than as disclosed in the
Company’s Form 14F-1 filed with the SEC, no executive officer
of the Company (as defined in Rule 501(f) of the Securities Act)
has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer’s employment with
the Company. To the knowledge of the Company, no executive officer
of the Company is, or is expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive
officer does not subject the Company to any liability with respect
to any of the foregoing matters. The Company and each of its
subsidiaries is in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse
Effect. 

 

2.30           No
Manipulation; Disclosure of Information. The Company has not
taken and will not take any action designed to or that might
reasonably be expected to cause or result in an unlawful
manipulation of the price of the Common Stock to facilitate the
sale or resale of the Securities. The Company confirms that, to its
knowledge, with the exception of the proposed sale of Securities as
contemplated herein (as to which the Company makes no
representation under this Section 2.30) and information
provided with respect to the Merger, the Acquisition Agreement, the
First Lien Credit Facility, the Second Lien Credit Facility and the
Company’s sale of Series D preferred stock in connection with
the Merger, neither it nor any other person acting on its behalf
has provided the Purchaser or its agents or counsel with any
information that constitutes or might constitute material,
non-public information. The Company understands and confirms that
the Purchaser shall be relying on the foregoing representations in
effecting transactions in securities of the Company. All
disclosures provided to the Purchaser regarding the Company, its
business and the transactions noted in this Section 2.30 furnished
by the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not
misleading.

 

2.31           Forward-Looking
Information. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act) made by the Company or any of its officers or
directors contained in the SEC Documents, or made available to the
public generally since December 31, 2017, has been made or
reaffirmed without a reasonable basis or has been disclosed other
than in good faith.

 

2.32           No
Additional Agreements. Except for the issuance of common
stock pursuant to the Merger Agreement and the Acquisition
Agreement and the issuance of preferred stock listed on Schedule
2.6, the Company has no other agreements or understandings
(including, without limitation, side letters) with any other person
to purchase shares of its Common Stock on terms more favorable to
such person than as set forth herein.

 

 

 

9

 

 

 

2.33           No
“Bad Actor” Disqualification. The Company has
exercised reasonable care, in accordance with SEC rules and
guidance, and has conducted a factual inquiry, the nature and scope
of which reflect reasonable care under the relevant facts and
circumstances, to determine whether any Covered Person (as defined
below) is subject to any of the “bad actor”
disqualifications described in Rule 506(d)(1)(i) to (viii) under
the Securities Act (“Disqualification Events”). To the
Company’s knowledge, after conducting such sufficiently
diligent factual inquiries, no Covered Person is subject to a
Disqualification Event, except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3) under the Securities Act. The Company
has complied, to the extent applicable, with any disclosure
obligations under Rule 506(e) under the Securities Act.
“Covered
Persons” are those persons specified in Rule 506(d)(1)
under the Securities Act, including the Company; any predecessor or
affiliate of the Company; any director, executive officer, other
officer participating in the offering, general partner or managing
member of the Company; any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power; any promoter (as defined in Rule 405
under the Securities Act) connected with the Company in any
capacity at the time of the sale of the Securities; and any person
that has been or will be paid (directly or indirectly) remuneration
for solicitation of purchasers in connection with the sale of the
Securities (a “Solicitor”), any general partner
or managing member of any Solicitor, and any director, executive
officer or other officer participating in the offering of any
Solicitor or general partner or managing member of any
Solicitor.

 

3.            

Representations and Warranties of the
Purchaser. The Purchaser hereby represents and
warrants to the Company as follows:

 

3.1           Legal
Power. The Purchaser has the requisite power and authority
to enter into this Agreement and to carry out and perform its
obligations under the terms of this Agreement. All action on the
Purchaser’s part required for the lawful execution and
delivery of this Agreement have been or will be effectively taken
prior to the Closing.

 

3.2           Due
Execution. This Agreement has been duly authorized, executed
and delivered by the Purchaser, and, upon due execution and
delivery by the Company, this Agreement will be a valid and binding
agreement of the Purchaser, except as rights to indemnity hereunder
may be limited by federal or state securities laws and except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors’ rights generally or by equitable
principles.

 

3.3           Investment
Representations. In connection with the sale and issuance of
the Securities, the Purchaser makes the following
representations:

 

(a)           Investment
for Own Account. The Purchaser is acquiring the Securities
for its own account, not as nominee or agent, and not with a view
to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities Act;
provided, however, that by making the representations herein, the
Purchaser does not agree to hold any of the Securities for any
minimum or specific term and reserves the right to dispose of the
securities at any time in accordance with or pursuant to a
registration statement or an exemption from the registration
requirements of the Securities Act.

 

 

 

10

 

 

 

(b)           Transfer
Restrictions; Legends. The Purchaser understands that (i)
the Securities have not been registered under the Securities Act;
(ii) the Securities are being offered and sold pursuant to an
exemption from registration, based in part upon the Company’s
reliance upon the statements and representations made by the
Purchaser in this Agreement, and that the Securities must be held
by the Purchaser indefinitely, and that the Purchaser must,
therefore, bear the economic risk of such investment indefinitely,
unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration; (iii) each
Certificate representing Securities will be endorsed or notated
with substantially the following legend until the date the Shares
are eligible for sale without restriction or limitation under Rule
144 under the Securities Act or any successor rule
(“Rule
144”):

 

THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE
SECURITIES LAWS OF ANY STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR EXEMPTION THEREFROM. UNLESS SOLD PURSUANT TO EITHER AN EFFECTIVE
REGISTRATION STATEMENT OR RULE 144 UNDER THE SECURITIES ACT, THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS. 

 

(iv)
the Company will instruct any transfer agent not to register the
transfer of the Securities (or any portion thereof) until the
applicable date set forth in clause (iii) above unless (A) the
conditions specified in the foregoing legends are satisfied, (B) if
the opinion of counsel referred to above is to the further effect
that such legend is not required in order to establish compliance
with any provisions of the Securities Act or this Agreement, (C) if
the Purchaser provides the Company with reasonable assurance, such
as through a representation letter, that the Securities may be sold
pursuant to Rule 144 under the Securities Act, or (D) other
reasonably satisfactory assurances of such nature are given to the
Company. If so required by the Company’s transfer agent, the
Company shall cause its counsel to issue and deliver a legal
opinion to the transfer agent to effect the removal of the
restrictive legend contemplated by this Agreement.

 

The
Company acknowledges and agrees that the Purchaser may from time to
time pledge, and/or grant a security interest in some or all of the
Securities pursuant to a bona fide margin agreement in connection
with a bona fide margin account and, if required under the terms of
such agreement or account, the Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties. Such a
pledge or transfer shall not be subject to approval or consent of
the Company and no legal opinion of legal counsel to the pledgee,
secured party or pledgor shall be required in connection with the
pledge, but such legal opinion may be required in connection with a
subsequent transfer following default by the Purchaser transferee
of the pledge. No notice shall be required of such pledge. At the
appropriate Purchaser’s expense, the Company will execute and
deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) of the
Securities Act or other applicable provision of the Securities Act
to appropriately amend the list of Selling Shareholders
thereunder.

 

 

 

11

 

 

 

 

 

Certificates
evidencing the Shares shall not contain any restrictive legend
(including the legend set forth in this Section): (i) following a
resale of the Shares under an effective registration statement
(including the Registration Statement) covering the Shares, or (ii)
following a sale of such Shares pursuant to Rule 144, or (iii)
while such Shares are eligible for sale under Rule 144 and, with
respect to the Shares, the Purchaser is not and has not been for
three months an affiliate of the Company (as such term is defined
in Rule 144(a)(1)) and such Shares have been held for one year or
more pursuant to the requirements of Rule 144 and any other
requirements under Rule 144 have been satisfied at such time, or
(iv) if such legend is not required under applicable requirements
of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the SEC). Following such time
as restrictive legends are not required to be placed on
Certificates representing Shares, the Company will, no later than
three business days following the delivery by the Purchaser to the
Company or the Company’s transfer agent of a Certificate
representing Shares containing a restrictive legend and such other
documentation and representations as the Company, its legal counsel
or Transfer Agent may reasonably request to confirm compliance with
the preceding sentence as applicable (provided, however, that
neither the Company nor its legal counsel will require a legal
opinion in connection with any sale pursuant to Rule 144), deliver
or cause to be delivered to the Purchaser a Certificate
representing such Shares that is free from all restrictive legends.
The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section. Certificates
for Shares subject to legend removal hereunder shall be transmitted
by the transfer agent of the Company to the Purchaser by crediting
the account of the Purchaser’s prime broker with the
Depository Trust Company system unless the Purchaser provides
alternate written instructions. The Company will pay all fees and
expenses of its transfer agent and the Depository Trust Company in
connection with the removal of legends pursuant to this Section
3.3(b).

 

The
Purchaser agrees that the removal of the restrictive legend from
Certificates representing Shares as set forth in this Section
3.3(b) is predicated upon the Company’s reliance that the
Purchaser will sell any Shares pursuant to either the registration
requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption
therefrom.

 

(c)           Financial
Sophistication; Due Diligence. The Purchaser has such
knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment in
connection with the transactions contemplated in this Agreement.
The Purchaser has, in connection with its decision to purchase the
Securities, relied only upon the representations and warranties
contained herein and the information contained in the Company SEC
Documents. Further, the Purchaser has had such opportunity to
obtain additional information and to ask questions of, and receive
answers from, the Company, concerning the terms and conditions of
the investment and the business and affairs of the Company, as the
Purchaser considers necessary in order to form an investment
decision.

 

(d)           Accredited
Investor Status. The Purchaser is an “accredited
investor” as such term is defined in Rule 501(a) of the rules
and regulations promulgated under the Securities Act.

 

(e)           Residency.
The Purchaser is organized under the laws of the jurisdiction set
forth beneath the Purchaser’s name on the signature page
attached hereto, and its principal place of operations is in the
state set forth beneath the Purchaser’s name on the signature
page attached hereto.

 

(f)           General
Solicitation. The Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over the television or radio
or presented at any seminar or any other general solicitation or
general advertisement.

 

 

 

12

 

 

 

 

 

3.4           No
Investment, Tax or Legal Advice. The Purchaser understands
that nothing in the Company SEC Documents, this Agreement, or any
other materials presented to the Purchaser in connection with the
purchase and sale of the Securities constitutes legal, tax or
investment advice. The Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of
Securities.

 

3.5           Additional
Acknowledgement. The Purchaser acknowledges that it has
independently evaluated the merits of the transactions contemplated
by this Agreement, that it has independently determined to enter
into the transactions contemplated hereby, that it is not relying
on any advice from or evaluation by any other person. The Purchaser
acknowledges that it has not taken any actions that would deem the
Purchaser to be a members of a “group” for purposes of
Section 13(d) of the Exchange Act.

 

3.6           Limited
Ownership. The purchase of the Securities by the Purchaser
at the Closing will not result in the Purchaser (individually or
together with any other person or entity with whom the Purchaser
has identified, or will have identified, itself as part of a
“group” in a public filing made with the SEC involving
the Company’s securities) acquiring, or obtaining the right
to acquire, in excess of 19.999% of the outstanding shares of
Common Stock or voting power of the Company on a post-transaction
basis that assumes that the Closing shall have occurred. The
Purchaser does not presently intend to, along or together with
others, make a public filing with the SEC to disclose that it has
(or that it together with such other persons or entities have)
acquired, or obtained the right to acquire, as a result of the
Closing (when added to any other securities of the Company that it
or they then own or have the right to acquire), in excess of
19.999% of the outstanding shares of Common Stock or the voting
power of the Company on a post-transaction basis that assumes that
the Closing shall have occurred. 

 

3.7           No
Short Position. Other than consummating the transactions
contemplated hereunder, the Purchaser has not directly or
indirectly, nor has any person or entity acting on behalf of or
pursuant to any understanding with the Purchaser, executed any
purchases or sales, including short sales as defined in Rule 200 of
Regulation SHO under the Exchange Act (“Short Sales”), of the securities
of the Company during the period commencing from the time that the
Purchaser first received a term sheet (written or oral) from the
Company or any other person representing the Company setting forth
the material terms of the transactions contemplated hereunder until
the date hereof (“Discussion
Time”). Notwithstanding the foregoing, in the event
that the Purchaser is a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of the
Purchaser’s assets and the portfolio managers have no direct
knowledge of the investment decisions made by the portfolio
managers managing other portions of the Purchaser’s assets,
the representation set forth above shall only apply with respect to
the portion of assets managed by the portfolio manager that made
the investment decision to purchase the securities covered by this
Agreement. The Purchaser has maintained the confidentiality of all
disclosures made to it in connection with this transaction
(including the existence and terms of this transaction, the
Acquisition Agreement, the First Lien Credit Facility, the Second
Lien Credit Facility and the Company’s sale of Series D
preferred stock in connection with the Merger,). Notwithstanding
the foregoing, for avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any
actions, with respect to the identification of the availability of,
or securing of, available shares to borrow in order to effect short
sales or similar transactions in the future.

 

 

 

13

 

 

 

 

 

4.            

Conditions
to Closing.

 

4.1           Conditions
to Obligations of Purchaser at Closing. The
Purchaser’s obligation to purchase the Securities at the
Closing is subject to the fulfillment, on or prior to the Closing,
of all of the following conditions, any of which may be waived by
the Purchaser:

 

(a)           Representations
and Warranties True; Performance of Obligations. The
representations and warranties made by the Company in Section 2
shall be true and correct in all material respects (or, where the
representation and warranty itself is qualified by materiality, it
shall be true and correct in all respects) on the Closing Date with
the same force and effect as if they had been made on and as of
said date (except to the extent that any such representation and
warranty expressly speaks as of an earlier date, in which case such
representation and warranty shall be so true and correct as of such
earlier date), and the Company shall have performed and complied
with all obligations and conditions herein required to be performed
or complied with by it on or prior to the Closing, including, but
not limited to, those obligations and conditions set forth in
Sections 4.1(c), 4.1(f), 4.1(g), 4.1(h), and 4.1(i), and if the
Closing date is subsequent to the date hereof, a certificate duly
executed by an officer of the Company, to the effect of the
foregoing, shall be delivered to the Purchaser. The delivery of
such certificate shall evidence the satisfaction of the conditions
set forth in this Section 4.1.

 

(b)           Proceedings
and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and
all documents and instruments incident to such transactions shall
be reasonably satisfactory in substance and form to counsel to the
Purchaser, and counsel to the Purchaser shall have received all
such counterpart originals or certified or other copies of such
documents as they may reasonably request. The Company shall have
delivered (or caused to have been delivered) to the Purchaser, the
Certificate(s) required by this Agreement. 

 

(c)           Qualifications,
Legal Investment. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with
the lawful sale and issuance of the Securities shall have been duly
obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Securities shall
have been issued and no proceedings for such purpose shall be
pending or, to the knowledge of the Company, threatened by the SEC,
or any commissioner of corporations or similar officer of any state
having jurisdiction over this transaction. At the time of the
Closing, the sale and issuance of the Securities shall be legally
permitted by all laws and regulations to which the Company is
subject. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered,
promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby
which prohibits the consummation of any of the transactions
contemplated by this Agreement.

 

(d)           Execution
of Agreement. The Company shall have executed this Agreement
and have delivered this Agreement to the Purchaser.

 

(e)           Secretary’s
Certificate. The Company shall have delivered to the
Purchaser a certificate of the Secretary of the Company certifying
as to (i) the truth and accuracy of the resolutions of the board of
directors relating to the transaction contemplated hereby (a copy
of which shall be included with such certificate) and (ii) the
current versions of the Company’s Certificate of
Incorporation and bylaws.

 

 

 

14

 

 

 

(f)           Payment
of Structuring Fee. The $________ structuring fee
contemplated by Section 7.6 shall have been paid.

 

(g)           Trading
and Listing. Trading and listing of the Company’s
common stock on the Principal Market shall not have been suspended
by the SEC or the Principal Market.

 

(h)           Market
Listing. The Company will comply with all of the
requirements of the Financial Industry Regulatory Authority, Inc.
and the Principal Market with respect to the issuance of the
Securities and will list the Shares on the Principal Market no
later than the earlier of (a) the effective date of the
Registration Statement (as hereinafter defined) or (b) the Required
Effective Date (as hereinafter defined).

 

(i)           Blue
Sky. The Company shall have obtained all necessary
“blue sky” law permits and qualifications, or have the
availability of exemptions therefrom, required by any state for the
offer and sale of the Securities.

 

(j)           Material
Adverse Change. Since the date of this Agreement, there
shall not have occurred any event which results in a Material
Adverse Effect.

 

(k)           Merger.
The Merger and the transactions related thereto shall be
consummated in accordance with the Merger Agreement, including the
financings contemplated by the First Lien Credit Facility and the
Second Lien Credit Facility, contemporaneously with the
Offering.

 

4.2           Conditions
to Obligations of the Company. The Company’s
obligation to issue and sell the Securities at the Closing is
subject to the fulfillment, on or prior to the Closing, of the
following conditions, any of which may be waived by the
Company:

 

(a)           Representations
and Warranties True. The representations and warranties made
by the Purchaser in Section 3 shall be true and correct in all
material respects (or, where the representation and warranty itself
is qualified by materiality, it shall be true and correct in all
respects) on the Closing Date with the same force and effect as if
they had been made on and as of said date (except to the extent
that any such representation and warranty expressly speaks as of an
earlier date, in which case such representation and warranty shall
be so true and correct as of such earlier date).

 

(b)           Performance
of Obligations. The Purchaser shall have performed and
complied with all agreements and conditions herein required to be
performed or complied with by them on or before the Closing. The
Purchaser shall have delivered the Purchase Price, by wire
transfer, to the account designated by the Company for such
purpose. 

 

(c)           Qualifications,
Legal Investment. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with
the lawful sale and issuance of the Securities shall have been duly
obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Securities shall
have been issued and no proceedings for such purpose shall be
pending or, to the knowledge of the Company, threatened by the SEC,
or any commissioner of corporations or similar officer of any state
having jurisdiction over this transaction. At the time of the
Closing, the sale and issuance of the Securities shall be legally
permitted by all laws and regulations to which the Company is
subject. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered,
promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby
which prohibits the consummation of any of the transactions
contemplated by this Agreement.

 

(d)           Execution
of Agreement. The Purchaser shall have executed this
Agreement and delivered this Agreement to the Company.

 

(e)           Merger.
The Merger and the transactions related thereto shall be
consummated in accordance with the Merger Agreement, including the
financings contemplated by the First Lien Credit Facility and the
Second Lien Credit Facility, contemporaneously with the
Offering.

 

 

 

15

 

 

 

4.3           Termination
of Obligations to Effect Closing; Effect.

 

(a)           Termination.
The obligations of the Company, on the one hand, and the Purchaser,
on the other hand, to effect the Closing shall terminate as
follows:

 

(i)           Upon
the mutual written consent of the Company and the
Purchaser;

 

(ii)           By
the Company if any of the conditions set forth in Section 4.2 shall
have become incapable of fulfillment, and shall not have been
waived by the Company;

 

(iii)           By
the Purchaser if any of the conditions set forth in Section 4.1
shall have become incapable of fulfillment, and shall not have been
waived by the Purchaser; or

 

(iv)           By
either the Company or the Purchaser if the Closing has not occurred
on or prior to May 15, 2018, 2018; provided, however, that, in
the case of clause (iii) above and clause (iv) with respect to the
Company, the party seeking to terminate its obligation to effect
the Closing shall not then be in breach of any of its
representations, warranties, covenants, or agreements contained in
this Agreement if such breach has resulted in the circumstances
giving rise to such party’s seeking to terminate its
obligation to effect the Closing.

 

(b)           Effect
of Termination. Nothing in this Section 4.3 shall be deemed
to release any party from any liability for any breach by such
party of the terms and provisions of this Agreement or to impair
the right of any party to compel specific performance by any other
party of its obligations under this Agreement. 

 

5.            

Additional
Covenants.

 

5.1           Reporting
Status. With a view to making available to the Purchaser the
benefits of certain rules and regulations of the SEC which may
permit the sale of the Shares to the public without registration,
the Company agrees to use its reasonable best efforts to file with
the SEC, in a timely manner, all reports and other documents
required of the Company under the Exchange Act. The Company will
otherwise take such further action as the Purchaser may reasonably
request, all to the extent required from time to time, to enable
the Purchaser to sell the Shares without registration under the
Securities Act or any successor rule or regulation adopted by the
SEC.

 

5.2           Listing.
So long as the Purchaser owns any of the Securities, the Company
will use its reasonable best efforts to maintain the qualification
or listing of its Common Stock, including the Shares, on the
Principal Market or an alternative listing on The Nasdaq Stock
Market, New York Stock Exchange or NYSE MKT and will comply in all
material respects with the Company’s reporting, filing and
other obligations under the rules of such exchanges, as
applicable.

 

5.3           Adjustments
in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of
Common Stock (or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly
shares of Common Stock), combination or other similar
recapitalization or event occurring after the date hereof, each
reference in this Agreement to a number of shares or price per
share shall be amended appropriately to account for such
event.

 

 

 

16

 

 

 

5.4           Non-Public
Information. The Company covenants and agrees that neither
it nor any other person acting on its behalf will provide the
Purchaser or its agents or counsel with any information that the
Company believes constitutes material non-public information,
unless prior thereto the Purchaser shall have executed a written
agreement regarding the confidentiality and use of such
information. The Company understands and confirms that the
Purchaser shall be relying on the foregoing representations in
effecting transactions in securities of the Company. Furthermore,
if the Company has disclosed any material non-public information to
the Purchaser, the Purchaser has no duty to keep such information
confidential following the public announcement of the
Offering.

 

5.5           Lock-Up.
The Purchaser will not, without the prior written consent of the
Company, from the date of execution of this Agreement and
continuing to and including the date 180 days after the Closing
Date (the “Lock-Up
Period”): (1) offer,
pledge, announce the intention to sell, sell, contract to sell,
sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase,
make any short sale or otherwise transfer or dispose of, directly
or indirectly, any shares of Common Stock or any securities
convertible into, exercisable or exchangeable for or that represent
the right to receive Common Stock (including without limitation,
Common Stock which may be deemed to be beneficially owned by the
Purchaser in accordance with the rules and regulations of the SEC
and securities which may be issued upon exercise of a stock option
or warrant) (the “Purchaser’s
Securities”); (2) enter
into any swap, hedge or other transaction or transfer which could
reasonably be expected to lead to or result in a transfer, sale or
disposition of the Purchaser’s Securities, or any of the
economic consequences of ownership thereof, whether any such
transaction described in clause (1) or (2) above is to be settled
by delivery of Common Stock or such other securities, in cash or
otherwise; (3) make any demand for or exercise any right with
respect to, the registration of any Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock,
provided, that nothing in this Section 5.5 is intended to limit any
claim regarding the breach or enforcement of the provisions of
Section 6; or (4) publicly disclose the intention to do any of the
foregoing.

 

Notwithstanding the
foregoing, the Purchaser may transfer the Purchaser’s
Securities (i) as a bona
fide gift or gifts, or (ii) if the Purchaser is a corporation, partnership,
limited liability company, trust or other business entity (1) to
another corporation, partnership, limited liability company, trust
or other business entity that is a direct or indirect affiliate (as
defined in Rule 405 promulgated under the Securities Act) of the
Purchaser or (2) as
distributions of shares of Common Stock or any security convertible
into or exercisable for Common Stock to limited partners, limited
liability company members or stockholders of the Purchaser; provided, that (x) such transfer
shall not involve a disposition for value, (y) the transferee
agrees in writing with the Representative to be bound by the terms
of this Section 5.5 and (z) no filing by any party under Section
16(a) of the Exchange Act, shall be required or shall be made
voluntarily in connection with such transfer.

 

In
furtherance of the foregoing, the Company and its transfer agent
and registrar are hereby authorized to decline to make any transfer
of shares of Common Stock if such transfer would constitute a
violation or breach of this Section 5.5.

 

 

 

17

 

 

 

 

 

6.            

Registration
Rights.

 

6.1           Registration
Procedures and Expenses; Liquidated Damages for Certain
Events.

 

(a)           The
Company shall prepare and file with the SEC, as promptly as
reasonably practicable following Closing, a registration statement
on Form S-3 (or any successor to Form S-3), covering the resale of
the Registrable Securities (the “S-3 Registration Statement”) and
use all commercially reasonable efforts to, as soon as reasonably
practicable thereafter but in no event later than 120 days
following the date hereof (or 150 days in the event of a full
review of the S-3 Registration Statement by the SEC), effect such
registration and any related qualification or compliance with
respect to all Registrable Securities held by the Purchaser. For
purposes of this Agreement, the term “Registrable Securities” shall
mean (i) the Shares and (ii) any Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement
of, any Shares. In the event that Form S-3 (or any successor form)
is or becomes unavailable to register the resale of the Registrable
Securities at any time prior to the date of the initial filing of
the S-3 Registration Statement (the “Initial Filing Date”), the
Company shall prepare and file with the SEC, as promptly as
reasonably practicable a registration statement on Form S-1 (or any
successor to Form S-1), covering the resale of the Registrable
Securities (the “S-1
Registration Statement” and collectively the S-3
Registration Statement, the “Registration Statement”) and use
all commercially reasonable efforts to, as soon as reasonably
practicable thereafter but in no event later than 120 days
following the date hereof (150 days in the event of a full review
of the S-1 Registration Statement by the SEC), to effect such
registration and any related qualification or compliance with
respect to all Registrable Securities held by the Purchaser. If the
Company is not eligible to use Form S-3 at the Initial Filing Date,
and the Company subsequently becomes eligible to use Form S-3
during the Effectiveness Period (as defined below), the Company
shall file, as promptly as reasonably practicable, a new S-3
Registration Statement, or if available, an amendment to the Form
S-1, covering the resale of the Registrable Securities and replace
the S-1 Registration Statement with the new S-3 Registration
Statement or amended Form S-1, as the case may be, upon the
effectiveness of the new S-3 Registration Statement.

 

(b)           The
Company shall, during the Effectiveness Period (as hereinafter
defined), use its commercially reasonable efforts to:

 

(i)           prepare
and file with the SEC such amendments and supplements to the
Registration Statement and the Prospectus used in connection
therewith as may be necessary or advisable to keep the Registration
Statement current and effective for the Registrable Securities held
by the Purchaser for a period ending on the earlier of (i) the
second anniversary of the Closing Date, (ii) the date on which all
Registrable Securities may be sold without reporting obligations or
volume limitation or other restrictions on transfer or any other
restriction under Rule 144 or (iii) such time as all Registrable
Securities have been sold pursuant to a registration statement or
Rule 144 (collectively, the “Effectiveness Period”). The
Company shall notify the Purchaser promptly upon the Registration
Statement and each post-effective amendment thereto, being declared
effective by the SEC and advise the Purchaser that the form of
Prospectus contained in the Registration Statement or
post-effective amendment thereto, as the case may be, at the time
of effectiveness meets the requirements of Section 10(a) of the
Securities Act or that it intends to file a Prospectus pursuant to
Rule 424(b) under the Securities Act that meets the requirements of
Section 10(a) of the Securities Act;

 

 

 

18

 

 

 

(ii)           furnish
to the Purchaser promptly with respect to the Registrable
Securities registered under the Registration Statement such number
of copies of the Registration Statement and the Prospectus
(including supplemental prospectuses and amendments) filed with the
SEC in conformance with the requirements of the Securities Act and
such other documents as the Purchaser may reasonably request, in
order to facilitate the public sale or other disposition of all or
any of the Registrable Securities by the Purchaser;

 

(iii)           make
any necessary blue sky filings; and

 

(iv)           advise
the Purchaser, promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of
the initiation of any proceeding for that purpose; and it will
promptly use its reasonable best efforts to prevent the issuance of
any stop order or to obtain its withdrawal at the earliest possible
moment if such stop order should be issued.

 

(c)           With
a view to making available to the Purchaser the benefits of Rule
144 and any other rule or regulation of the SEC that may at any
time permit the Purchaser to sell Registrable Securities to the
public without registration, the Company covenants and agrees, for
as long as Purchaser owns any Shares (or any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in
replacement of, any Shares), to: (i) make and keep public
information available, as such term is understood and defined in
Rule 144, until the earlier of (A) such date as all of the
Registrable Securities qualify to be resold immediately pursuant to
Rule 144 or any other rule of similar effect without any
restriction under Rule 144 or such other rule or (B) such date as
all of the Registrable Securities shall have been resold pursuant
to a registration statement or Rule 144 (and may be further resold
without restriction); (ii) file with the SEC in a timely manner all
reports and other documents required of the Company under the
Securities Act and under the Exchange Act; and (iii) furnish to the
Purchaser upon request, as long as the Purchaser owns any
Registrable Securities, (A) a written statement by the Company as
to whether it has complied with the reporting requirements of the
Securities Act and the Exchange Act, (B) if not available on the
SEC EDGAR system, a copy of the Company’s most recent Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such
other information as may be reasonably requested in order to avail
the Purchaser of any rule or regulation of the SEC that permits the
selling of any such Registrable Securities without
registration. The Company understands that the Purchaser
disclaims being an underwriter, but acknowledges that a
determination by the SEC that the Purchaser is deemed an
underwriter shall not relieve the Company of any obligations it has
hereunder.

 

(d)           The
Company shall pay the expenses incurred by the Company and the
Purchaser in complying with this Section 6, including, all
registration and filing fees, FINRA fees, exchange listing fees,
printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration (but
excluding attorneys’ fees of the Purchaser and any and all
underwriting discounts and selling commissions applicable to the
sale of Registrable Securities by the Purchaser).

 

 

 

19

 

 

 

 

 

6.2           Transfer
of Shares After Registration; Suspension.

 

(a)           Except
in the event that Section 6.2(b) applies, the Company shall during
the Effectiveness Period: (i) if deemed necessary or advisable by
the Company, prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or a supplement or amendment
to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and so that, as thereafter
delivered to purchasers of the Registrable Securities being sold
thereunder, such Prospectus will not contain an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading; (ii) provide the Purchaser copies, or access to copies,
of any documents filed pursuant to Section 6.2(a)(i); and (iii)
upon request, inform the Purchaser that the Company has complied
with its obligations in Section 6.2(b)(i) (or that, if the Company
has filed a post-effective amendment to the Registration Statement
which has not yet been declared effective, the Company will notify
the Purchaser to that effect, will use its reasonable best efforts
to secure the effectiveness of such post-effective amendment as
promptly as possible and will promptly notify the Purchaser
pursuant to Section 6.2(b)(i) when the amendment has become
effective).

 

(b)           Subject
to Section 6.1(c), in the event: (i) of any request by the SEC or
any other federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or
supplements to the Registration Statement or related Prospectus or
for additional information; (ii) of the issuance by the SEC or any
other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) of the
receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of
any of the Registrable Securities for sale in any jurisdiction or
the initiation of any proceeding for such purpose; or (iv) of any
event or circumstance which necessitates the making of any changes
in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so
that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; then the
Company shall promptly deliver a certificate in writing to the
Purchaser (the “Suspension
Notice”) to the effect of the foregoing and, upon
receipt of such Suspension Notice, the Purchaser will refrain from
selling any Registrable Securities pursuant to the Registration
Statement (a “Suspension”) until the Purchaser
is advised in writing by the Company that the current Prospectus
may be used, and have received copies, or access to copies, from
the Company of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in any such
Prospectus. In the event of any Suspension, the Company will use
its reasonable best efforts to cause the use of the Prospectus so
suspended to be resumed as soon as reasonably practicable after
delivery of a Suspension Notice to the Purchaser. In addition to
and without limiting any other remedies (including, without
limitation, at law or at equity) available to the Company and the
Purchaser, the Company and the Purchaser shall be entitled to
specific performance in the event that the other party fails to
comply with the provisions of this Section 6.2(b).  

 

(c)           Notwithstanding
the foregoing paragraphs of this Section 6.2, the Company shall use
its reasonable best efforts to ensure that (i) a Suspension shall
not exceed 30 days individually, (ii) Suspensions covering no more
than 45 days, in the aggregate, shall occur during any twelve month
period and (iii) each Suspension shall be separated by a period of
at least 30 days from a prior Suspension (each Suspension that
satisfies the foregoing criteria being referred to herein as a
“Qualifying
Suspension”).

 

 

 

20

 

 

 

 

 

(d)           During
the Effectiveness Period, the Company shall cause Certificates
evidencing the Registrable Securities not to contain any
restrictive legend (including the legend set forth in Section
3.3(b)): (i) following a resale of the Shares under an effective
registration statement (including the Registration Statement)
covering such Registrable Securities, or (ii) following a sale of
such Registrable Securities pursuant to Rule 144, or (iii) while
such Registrable Securities are eligible for sale under Rule 144
and, with respect to the Purchaser’s Shares, the Purchaser is
not and has not been for three months an affiliate of the Company
(as such term is defined in Rule 144(a)(1)) and such Shares have
been held for one year or more pursuant to the requirements of Rule
144 and any other requirements under Rule 144 have been satisfied
at such time, or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the SEC).
Following such time as restrictive legends are not required to be
placed on Certificates representing Shares, the Company will, no
later than three Trading Days following the delivery by the
Purchaser to the Company or the Company’s transfer agent of a
Certificate representing Registrable Securities containing a
restrictive legend, deliver or cause to be delivered to the
Purchaser a Certificate representing such Registrable Securities
that is free from all restrictive legends. Promptly after the
Registration Statement is declared effective by the SEC, the
Company will cause its counsel to issue a legal opinion to the
Company’s transfer agent to effect the removal of the
restrictive legend contemplated by this Agreement upon request by
the Purchaser in connection with a sale of the Purchaser’s
Registrable Securities by the Purchaser pursuant to the
Registration Statement. The Company may not make any notation on
its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this
Agreement. Certificates for Registrable Securities subject to
legend removal hereunder shall be transmitted by the transfer agent
of the Company to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company
system unless the Purchaser provides alternate written
instructions.

 

6.3           Indemnification.
For the purpose of this Section 6.3:

 

(a)           the
term “Selling
Shareholder” shall mean the Purchaser, its general
partners, managing members, managers, executive officers and
directors and each person, if any, who controls the Purchaser
within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act;

 

(b)           the
term “Registration
Statement” shall include any final Prospectus,
exhibit, supplement or amendment included in or relating to, and
any document incorporated by reference in, the Registration
Statement (or deemed to be a part thereof) referred to in Section
6.1; and

 

 

 

21

 

 

 

 

 

(c)           the
term “untrue
statement” shall mean any untrue statement or alleged
untrue statement of a material fact, or any omission or alleged
omission to state in the Registration Statement a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. 

 

(d)           The
Company agrees to indemnify and hold harmless each Selling
Shareholder from and against any losses, claims, damages or
liabilities to which such Selling Shareholder may become subject
(under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon (i) any untrue
statement of a material fact contained in the Registration
Statement, (ii) any inaccuracy in the representations and
warranties of the Company contained in this Agreement or the
failure of the Company to perform its obligations hereunder or
(iii) any failure by the Company to fulfill any undertaking
included in the Registration Statement, and the Company will
reimburse such Selling Shareholder for any reasonable legal expense
or other actual accountable out-of-pocket expenses reasonably
incurred in investigating, defending or preparing to defend any
such action, proceeding or claim; provided, however, that the
Company shall not be liable in any such case to the extent that
such loss, claim, damage or liability arises out of, or is based
upon, an untrue statement made in such Registration Statement in
reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Selling Shareholder
specifically for use in preparation of the Registration Statement
or the failure of such Selling Shareholder to comply with its
covenants and agreements contained herein or any statement or
omission in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Selling Shareholder prior to
the pertinent sale or sales by the Selling
Shareholder.

 

(e)           The
Purchaser agrees to indemnify and hold harmless the Company (and
each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
each officer of the Company who signs the Registration Statement
and each director of the Company) from and against any losses,
claims, damages or liabilities to which the Company (or any such
officer, director or controlling person) may become subject (under
the Securities Act or otherwise), insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement of a
material fact contained in the Registration Statement if, and only
if, such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf of
the Purchaser specifically for use in preparation of the
Registration Statement, and the Purchaser will reimburse the
Company (or such officer, director or controlling person, as the
case may be), for any reasonable legal expense or other actual
accountable out-of-pocket expenses reasonably incurred in
investigating, defending or preparing to defend any such action,
proceeding or claim. The obligation to indemnify shall be limited
to the net amount of the proceeds received by the Purchaser from
the sale of the Registrable Securities pursuant to the Registration
Statement.

 

 

 

22

 

 

 

 

 

(f)           Promptly
after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 6.3,
such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action, but
the omission to so notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party
under this Section 6.3 (except to the extent that such omission
materially and adversely affects the indemnifying party’s
ability to defend such action) or from any liability otherwise than
under this Section 6.3. Subject to the provisions hereinafter
stated, in case any such action shall be brought against an
indemnified person, the indemnifying person shall be entitled to
participate therein, and, to the extent that it shall elect by
written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, shall
be entitled to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to
assume the defense thereof (unless it has failed to assume the
defense thereof and appoint counsel reasonably satisfactory to the
indemnified party), such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the defense
thereof; provided, however, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the
reasonable opinion of counsel to the indemnified person, for the
same counsel to represent both the indemnified person and such
indemnifying person or any affiliate or associate thereof, the
indemnified person shall be entitled to retain its own counsel (who
shall not be the same as the opining counsel) at the expense of
such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than
one separate counsel (together with appropriate local counsel) for
all indemnified parties. In no event shall any indemnifying person
be liable in respect of any amounts paid in settlement of any
action unless the indemnifying person shall have approved the terms
of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying person shall, without the
prior written consent of the indemnified person, effect any
settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could reasonably have been a
party and indemnification could have been sought hereunder by such
indemnified person, unless such settlement includes an
unconditional release of such indemnified person from all liability
on claims that are the subject matter of such
proceeding. 

 

(g)           If
the indemnification provided for in this Section 6.3 is unavailable
to or insufficient to hold harmless an indemnified party under
subsection (d) or (e) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to
reflect the relative fault of the Company on the one hand and the
Purchaser on the other in connection with the statements or
omissions or other matters which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as
any other relevant equitable considerations. The relative fault
shall be determined by reference to, among other things, in the
case of an untrue statement, whether the untrue statement relates
to information supplied by the Company on the one hand or the
Purchaser on the other and the parties’ relative intent,
knowledge, access to information and opportunity to correct or
prevent such untrue statement. The Company and the Purchaser agree
that it would not be just and equitable if contribution pursuant to
this subsection (g) were determined by pro rata allocation or by
any other method of allocation which does not take into account the
equitable considerations referred to above in this subsection (g).
The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (g) shall be deemed
to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this
subsection (g), the Purchaser shall be required to contribute any
amount in excess of the amount by which the net amount received by
the Purchaser from the sale of the Registrable Securities to which
such loss relates exceeds the amount of any damages which the
Purchaser has otherwise been required to pay to the Company by
reason of such untrue statement. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent
misrepresentation.

 

 

 

23

 

 

 

 

 

(h)           The
parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel
during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 6.3, and are
fully informed regarding said provisions. They further acknowledge
that the provisions of this Section 6.3 fairly allocate the risks
in light of the ability of the parties to investigate the Company
and its business in order to assure that adequate disclosure is
made in the Registration Statement as required by the Securities
Act and the Exchange Act.

 

(i)           The
obligations of the Company and of the Purchaser under this Section
6.3 shall survive completion of any offering of Registrable
Securities in such Registration Statement for a period of two years
from the effective date of the Registration Statement. No
indemnifying party, in the defense of any such claim or litigation,
shall, except with the consent of each indemnified party, consent
to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation. 

 

6.4           Termination
of Conditions and Obligations. The conditions precedent
imposed by Section 3 or this Section 6 upon the transferability of
the Registrable Securities shall cease and terminate as to any
particular number of the Registrable Securities when such
Registrable Securities shall have been effectively registered under
the Securities Act and sold or otherwise disposed of in accordance
with the intended method of disposition set forth in the
Registration Statement covering such Registrable Securities or at
such time as an opinion of counsel satisfactory to the Company
shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act. The Company
shall request an opinion of counsel promptly upon receipt of a
request therefor from the Purchaser.

 

6.5           Information
Available. So long as the Registration Statement is
effective covering the resale of Registrable Securities owned by
the Purchaser, the Company will furnish (or, to the extent such
information is available electronically through the Company’s
filings with the SEC, the Company will make available via the
SEC’s EDGAR system or any successor thereto) to the
Purchaser:

 

(a)           as
soon as practicable after it is available, one copy of its Annual
Report on Form 10-K (the foregoing, in each case, excluding
exhibits);

 

(b)           upon
the request of the Purchaser, all exhibits excluded by the
parenthetical to subparagraph (a) of this Section 6.5 as filed with
the SEC and all other information that is made available to
shareholders; and

 

(c)           upon
the reasonable request of the Purchaser, an adequate number of
copies of the Prospectuses to supply to any other party requiring
such Prospectuses; and the Company, upon the reasonable request of
Purchaser, will meet with the Purchaser or a representative thereof
at the Company’s headquarters during the Company’s
normal business hours to discuss all information relevant for
disclosure in the Registration Statement covering the Registrable
Securities and will otherwise reasonably cooperate with the
Purchaser conducting an investigation for the purpose of reducing
or eliminating the Purchaser’s exposure to liability under
the Securities Act, including the reasonable production of
information at the Company’s headquarters; provided, that the
Company shall not be required to disclose any confidential
information to or meet at its headquarters with the Purchaser until
and unless the Purchaser shall have entered into a confidentiality
agreement in form and substance reasonably satisfactory to the
Company with the Company with respect thereto.

 

 

 

24

 

 

 

 

 

6.6           Protection
of Exemptions. The Company will not, for a period of six
months following the Closing Date offer for sale or sell any
securities unless, in the opinion of the Company’s counsel,
such offer or sale does not jeopardize the availability of
exemptions from the registration and qualification requirements
under applicable securities laws with respect to the Offering.
Except for the issuance of stock options under the Company’s
stock option plans, the issuance of common stock upon exercise of
outstanding options and warrants, the issuance of common stock
purchase warrants, the issuance of Common Stock pursuant to the
Merger Agreement or the Acquisition Agreement, the Company’s
sale of Series D preferred stock in connection with the Merger, the
Company’s public offering of Common Stock consummated on
February 5, 2018 and the offering contemplated hereby, the Company
has not engaged in any offering of equity securities during the six
(6) months prior to the date of this Agreement. The foregoing
provisions of this Section 6.6 shall not prevent the Company from
filing a “shelf” registration statement pursuant to
Rule 415 under the Securities Act, but the foregoing provisions
shall apply to any sale of securities thereunder.

 

6.7           Form D
and State Securities Filings. The Company will file with the
SEC a Notice of Sale of Securities on Form D with respect to
the Securities, as required under Regulation D under the
Securities Act, no later than 15 days after the Closing Date. The
Company will promptly and timely file all documents and pay all
filing fees required by any states’ securities laws in
connection with the sale of Securities.

 

6.8           Assignment
of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 6 may be
assigned by the Purchaser to a party that acquires, other than
pursuant to the Registration Statement or Rule 144, any of the
Registrable Securities originally issued or issuable to the
Purchaser as contemplated by this Agreement, or to any affiliate of
the Purchaser that acquires any Registrable Securities. Any such
permitted assignee shall have all the rights of the Purchaser under
this Section 6 with respect to the Registrable Securities
transferred during the Effectiveness Period.

 

6.9           Selling
Shareholder Questionnaire. The Purchaser agrees to furnish
to the Company a completed questionnaire in the form attached to
this Agreement as Exhibit A (a
“Selling Holder
Questionnaire”). The Company shall not be required to
include the Registrable Securities of the Purchaser in a
Registration Statement and shall not be required to pay any
liquidated or other damages hereunder to the Purchaser if the
Purchaser fails to furnish to the Company a fully completed Selling
Holder Questionnaire at least three business days prior to the
filing of the Registration Statement.

 

7.            

Miscellaneous.

 

7.1           Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard
to the choice of law provisions thereof, and the federal laws of
the United States.

 

 

 

25

 

 

 

 

 

7.2           Successors
and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators
of the parties hereto. Notwithstanding the foregoing, the Company
may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the
Purchaser.

 

7.3           Entire
Agreement. This Agreement and the exhibits hereto, and the
other documents delivered pursuant hereto, constitute the full and
entire understanding and agreement among the parties with regard to
the subjects hereof and no party shall be liable or bound to any
other party in any manner by any representations, warranties,
covenants, or agreements except as specifically set forth herein or
therein. Nothing in this Agreement, express or implied, is intended
to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein. 

 

7.4           Severability.
In the event any provision of this Agreement shall be invalid,
illegal, or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to
retain as nearly as practicable the intent of the parties, and the
validity, legality, and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.

 

7.5           Amendment
and Waiver. Except as otherwise provided herein, any term of
this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular
instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely), with the written consent
of the Company and the Purchaser. Any amendment or waiver effected
in accordance with this Section 7.5 shall be binding upon each
future holder of any of the Securities purchased under this
Agreement and the Company.

 

7.6           Fees
and Expenses. Except as otherwise set forth herein, the
Company and the Purchaser shall bear their own expenses and legal
fees incurred on their behalf with respect to this Agreement and
the transactions contemplated hereby. Each party hereby agrees to
indemnify and to hold harmless of and from any liability the other
party for any commission or compensation in the nature of a
finder’s fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted
liability) for which such indemnifying party or any of its
employees or representatives are responsible. The Company shall pay
to the Purchaser a structuring fee of $__________ at Closing,
payable in cash to Purchaser or its designee or, at
Purchaser’s option, payable by offsetting such amount from
the Purchase Price. The parties acknowledge that no fees or
expenses, other than the structuring fee, shall be payable by the
Company to the Purchaser.

 

 

 

26

 

 

 

 

 

7.7           Notices.
All notices, requests, consents and other communications hereunder
shall be in writing, shall be delivered (A) if within the United
States, by first-class registered or certified airmail, or
nationally recognized overnight express courier, postage prepaid or
by electronic mail, or (B) if from outside the United States, by
International Federal Express (or comparable service) or by
electronic mail, and shall be deemed given (i) if delivered by
first-class registered or certified mail domestic, upon the
business day received, (ii) if delivered by nationally recognized
overnight carrier, one business day after timely delivery to such
carrier, (iii) if delivered by International Federal Express (or
comparable service), two business days after so mailed, or (iv) if
delivered by electronic mail at or prior to 5:30 p.m. (New York
City time) on a Trading Day, on the Trading Day so delivered or, if
delivered by electronic mail after 5:30 p.m. (New York City time)
on a Trading Day or on a day that is not a Trading Day, the next
Trading Day after the date of delivery, and shall be addressed as
follows, or to such other address or addresses as may have been
furnished in writing by a party to another party pursuant to this
paragraph:

 

● 

if to the Company,
to the address of the Company’s principal office set forth on
the first page of this Agreement, Attention: James P. Prenetta,
Jr., EVP and General Counsel, e-mail: jprenetta@fusionconnect.com
with a copy to (which shall not constitute notice to the Company)
Kelley Drye & Warren LLP, 101 Park Avenue, New York, New York
10178, Attention: Carol Weiss Sherman, e-mail:
csherman@kelleydrye.com and

 

● 

if to the
Purchaser, at its address on the signature page to this
Agreement.

 

7.8           Survival
of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and
warranties made by the Company and the Purchaser herein shall
survive the execution of this Agreement, the delivery to the
Purchaser of the Securities being purchased and the payment
therefor, and a party’s reliance on such representations and
warranties shall not be affected by any investigation made by such
party or any information developed thereby.

 

7.9           Counterparts.
This Agreement may be executed by pdf signature and in any number
of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one instrument.

 

7.10           Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

 

 

 

[The Remainder of this Page is Blank; Signature Pages
Follow]

 

 

27

 

In
witness whereof, the foregoing Common Stock Purchase Agreement is
hereby executed as of the date first above
written. 

 

	
 

	

FUSION CONNECT, INC.

	
 

	
 

	
 

	

By:

	
 

	
 

	

Name:

	

James
P. Prenetta, Jr.

	
 

	

Title:

	

Executive
Vice President and General Counsel

 

 

 

 

 

 

 

 

 

 

 

 

In
witness whereof, the foregoing Common Stock Purchase Agreement is
hereby executed as of the date first above
written. 

 

	
 

	
 

	
 

	

Name of
Investor

	
 

	
 

	
 

	

By:

	
 

	
 

	

Name:

	
 

	
 

	

Title:

	
 

 

 

	
 

	

Tax
Identification No.:

	
 

 

	
 

	

Jurisdiction
of Organization:

	
 

 

	
 

	

Jurisdiction
of Principal Place of Operations:

	
 

	
 

	
 

	
 

	
 

	

Address
for Notice:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

Attention:

	
 

	
 

	

Telephone:

	
 

 

	
 

	

E-mail:

	
 

 

	
 

	

Delivery
Instructions (if different from above):

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	

Attention:

	
 

	
 

	

Telephone:

	
 

 

 

 

 

EXHIBIT A

 

SELLING SHAREHOLDER QUESTIONNAIRE

 

FUSION CONNECT, INC.

 

Questionnaire for Selling Shareholder

 

This
questionnaire is necessary to obtain information to be used by
Fusion Connect, Inc. (the “Company”) to complete a
Registration Statement (the “Registration Statement”) covering
the resale of certain shares of Company Common Stock currently
outstanding. Please complete and return this questionnaire to
Kelley Drye & Warren LLP, the Company’s legal counsel,
to the attention of Carol Weiss
Sherman either by mail to 101 Park Avenue, New York, New
York 10178 or by fax to (212) 808-7897 or by email to
csherman@kelleydrye.com. Please return the questionnaire
by [●], or sooner, if
possible. Call Carol Weiss Sherman at 212-808-5038 with
questions.

 

FAILURE
TO RETURN THE QUESTIONNAIRE MAY RESULT IN THE EXCLUSION OF YOUR
NAME AND SHARES FROM THE REGISTRATION STATEMENT.

 

Please
answer all questions. If
the answer to any question is “None” or “Not
Applicable,” please so state.

 

If
there is any question about which you have any doubt, please set
forth the relevant facts in your answer.

 

1. 

Please correct your
name and/or
address if not
correct below

 

	
 

	

Name:

	
 

	
 

	
 

	
 

	
 

	

Address:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

2. 

Please state the
total number of
currently outstanding shares of Company Common Stock that you
beneficially own1 and the form of ownership and the date
that you acquired such stock. Include shares registered in your
name individually or jointly with others and shares held in the
name of a bank, broker, nominee, depository or in “street
name” for your account. (DO NOT list options, warrants or
other derivative securities. See Question #3).

 

3. 

Please list any
outstanding options and warrants to purchase Company Common Stock
or other derivative securities to acquire Company Common Stock that
you beneficially own*, including (i) the
number of shares of Company Common Stock to be issued upon the
exercise of such option or warrant, (ii) the date such option or
warrant is exercisable, (iii) the expiration date and (iv) the
exercise price per share of EACH such option and
warrant.

 

 

1 See Appendix A for
definitions

 

 

 

 

 

 

 

	

Number of SharesCovered by Option orWarrant

	
 

	

Date Exercisable

	
 

	

Exercise Price

	
 

	

Expiration Date

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

4. 

Please list the
number of shares of Common Stock listed under Question #2 above
that you wish to include in the Registration
Statement.

 

5. 

If you are a
limited liability company or limited partnership, please name the
managing member or general partner and each person controlling such
managing member or general partner.

 

6. 

If you are an
entity, please identify the natural person(s) who exercises sole or
shared voting power* and/or sole or shared investment power* with
regard to the shares listed under Question #2 and Question
#3.

 

7. 

Please advise
whether you are a registered broker-dealer or an affiliate*
thereof. If you are an affiliate of a registered broker-dealer,
please explain the nature of the affiliation and disclose whether
you acquired the shares in the ordinary course of business and
whether at the time of the acquisition you had any plans or
proposals, directly or with any other person, to distribute the
shares listed under Question #2 and Question #3.

 

8. 

List below the
nature of any position, office or other material relationship that
you have, or have had within the past three years, with the Company
or any of its predecessors or affiliates*.

 

9. 

If you expressly
wish to disclaim any beneficial ownership* of any shares listed
under Question #2 for any reason in the Registration Statement,
indicate below the shares and circumstances for disclaiming such
beneficial ownership*.

 

10. 

With respect to the
shares that you wish to include in the Registration Statement,
please list any party that has or may have secured a lien, security
interest or any other claim relating to such shares, and please
give a full description of such claims.

 

 

 

	
 

	
 

	
 

	
 

	
 

	

By:

	
 

	
 

	

Name:

	
 

	
 

	

Its:

	
 

 

 

 

 

APPENDIX A

 

To Exhibit A

 

CERTAIN TERMS USED IN QUESTIONNAIRE

 

AFFILIATE

 

An
“affiliate” of
a company is a person that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under
common control with, such company.

 

BENEFICIAL OWNERSHIP

 

A
person “beneficially
owns” a security if such person, directly or
indirectly, has or shares voting power or investment power of such
security, whether through a contract, arrangement, understanding,
relationship or otherwise. A person is also the beneficial owner of
a security if he has the right to acquire beneficial ownership at
any time within 60 days through the exercise of any option, warrant
or right, or the power to revoke a trust, discretionary account or
similar arrangement.

 

INVESTMENT POWER

 

“Investment power” includes the
power to dispose, or to direct the disposition of, a
security.

 

VOTING POWER

 

“Voting power” includes the power
to vote, or to direct the voting of, a security.

 

 

 

 

 

 

Purchasers pursuant to Common Stock Purchase Agreement, dated May
4, 2018:

 

 

	

Purchaser

	

Number
of Shares

	

Purchase
Price

	
 

	
 

	
 

	

North
Haven Credit Partners II L.P.

	

952,382

	

$5,000,005.50

	

Aetna
Life Insurance Company

	

380,953

	

$2,000,003.25

	

Backcast
Credit Opportunities Fund I, L.P.

	

190,477

	

$1,000,004.25Blueprint

 

PREFERRED STOCK PURCHASE AGREEMENT

 

This
Preferred Stock Purchase Agreement (this “Agreement”) is made as of May 4,
2018, by and among FUSION
CONNECT, INC., f/k/a
Fusion Telecommunications International, Inc., a Delaware
corporation with its principal office at 420 Lexington Avenue,
Suite 1718, New York, New York 10170 (the “Company”), and Holcombe T. Green,
Jr.(the “Purchaser”).

 

Recitals

 

A.           The
Company has authorized the sale and issuance of 15,000 shares (the
“Shares” or
“Securities”)
of Series D Cumulative Preferred Stock of the Company, $0.01 par
value per share (the “Preferred Stock”), to the Purchaser in a
private placement (the “Offering”).

 

B.           The
Company has created or will create the Preferred Stock by filing a
Certificate of Designations and Preferences relating to the
Preferred Stock (the “Certificate of Designations”)
with the Secretary of State of the State of Delaware (the
“Secretary of
State”) in substantially the form annexed hereto as
Exhibit A,
contemporaneously with this execution and delivery of this
Agreement.

 

C.           Pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506(b) promulgated thereunder, the
Company desires to sell to the Purchaser, and the Purchaser desires
to purchase from the Company, the Shares on the terms and subject
to the conditions set forth in this Agreement.

 

Terms and Conditions

 

Now,
therefore, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties,
intending to be legally bound, do hereby agree as
follows:

 

1. Purchase
of the Securities.

 

1.1 Agreement
to Sell and Purchase. At the Closing (as hereinafter
defined), the Company will issue and sell to the Purchaser, and the
Purchaser will purchase from the Company, the Shares for an
aggregate purchase price of $14,700,000 (the “Purchase Price”) or $980.00 for
each Share.

 

1.2 Closing;
Closing Date. The completion of the sale and purchase of the
Shares (the “Closing”) shall be held
simultaneously with the execution of this Agreement, or at such
other time as the Company and the Purchaser may agree (the
“Closing
Date”).

 

1.3 Delivery
of the Shares. At the Closing, subject to the terms and
conditions hereof, the Company will deliver to the Purchaser a
stock certificate or certificates, in such denominations and
registered in such name(s) as the Purchaser may designate by notice
to the Company, representing the Securities, or at the
Purchaser’s request, a statement or other written evidence
that the Securities issuable to the Purchaser have been issued and
are held in book entry form, in either case dated as of the Closing
Date (each such certificate and each such book entry position are
hereinafter referred to as a “Certificate”), against payment of
the Purchase Price in cash in the form of a wire transfer, unless
other means of payment shall have been agreed upon by the Purchaser
and the Company.

 

 

 

-1-

 

 

 

2. Representations
and Warranties of the Company. The Company hereby represents
and warrants to the Purchaser, after giving effect (unless
otherwise specified below) to the consummation of the merger
between Fusion BCHI Acquisition LLC, a Delaware limited liability
company and a wholly-owned subsidiary of the Company,
with Birch
Communications Holdings, Inc. (“Birch”) and the transactions
related thereto being consummated substantially simultaneously with
this Offering (the “Merger”), and, as applicable,
based in part on information relating to Birch and its direct and
indirect subsidiaries as provided by Birch to the Company in
connection with the Merger Agreement (as defined below) and
subsequent thereto, and without making any representations or
warranties as to any subsidiaries acquired as part of the
Merger:

 

2.1 Authorization.
All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, has been taken. The
Company has the requisite corporate power to enter into this
Agreement and carry out and perform its obligations under this
Agreement. At the Closing, the Company will have the requisite
corporate power to issue and sell the Securities. This Agreement
has been duly authorized, executed and delivered by the Company
and, upon due execution and delivery by the Purchaser, this
Agreement will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except as rights to indemnity hereunder may be limited by federal
or state securities laws and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally or by
equitable principles.

 

2.2 No
Conflict with Other Instruments. The execution, delivery and
performance of this Agreement, the issuance and sale of the
Securities to be sold by the Company hereunder and the consummation
of the actions contemplated by this Agreement will not (A) result
in any violation of, be in conflict with, or constitute a default
under, with or without the passage of time or the giving of notice:
(i) any provision of the Company’s charter documents as in
effect on the date hereof or at the Closing (in each case, as
amended to include the Certificate of Designations); (ii) any
provision of any judgment, arbitration ruling, decree or order to
which the Company or its subsidiaries are a party or by which they
are bound; (iii) any bond, debenture, note or other evidence of
indebtedness, or any lease, contract, mortgage, indenture, deed of
trust, loan agreement, joint venture or other agreement, instrument
or commitment to which the Company or any subsidiary is a party or
by which they or their respective properties are bound; or (iv) any
statute, rule, law or governmental regulation or order applicable
to the Company or any of its subsidiaries, except, in the case of
(ii), (iii) and (iv) above, as would not reasonably be expected to
have a Material Adverse Effect (as hereinafter defined); or (B)
result in the creation or imposition of any lien, encumbrance,
claim, security interest or restriction whatsoever upon any of the
properties or assets of the Company or any subsidiary or any
acceleration of indebtedness pursuant to any obligation, agreement
or condition contained in any bond, debenture, note or any other
evidence of indebtedness or any indenture, mortgage, deed of trust
or any other agreement or instrument to which the Company or any
subsidiary are a party or by which they are bound or to which any
of the property or assets of the Company or any subsidiary is
subject. No consent, approval, authorization or other order of, or
registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body is required for
the execution and delivery of this Agreement by the Company and the
valid issuance or sale of the Securities by the Company pursuant to
this Agreement, other than such as have been made or obtained and
that remain in full force and effect, and except for the filing of
the Certificate of Designations or a Form D or any filings required
to be made under state securities laws.

 

 

 

-2-

 

 

 

2.3 Certificate
of Incorporation; Bylaws. The Company has made available to
the Purchaser true, correct and complete copies of the Certificate
of Incorporation and Bylaws of the Company, as in effect on the
date hereof.

 

2.4 Organization,
Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now
conducted. The Company and each of its subsidiaries has full power
and authority to own, operate and occupy its properties and to
conduct its business as presently conducted and is duly qualified
to transact business and is in good standing in each jurisdiction
in which the failure to so qualify would not reasonably be expected
to have a material adverse effect on its or its subsidiaries’
business, financial condition, properties, operations, prospects or
assets or its ability to perform its obligations under this
Agreement (a “Material
Adverse Effect”). 

 

2.5 SEC
Filings; Financial Statements. As used herein, the
“Company SEC
Documents” means all reports, schedules, forms,
statements and other documents filed or furnished, as applicable,
by the Company under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), including pursuant to Section 13(a) or 15(d)
thereof, including the exhibits thereto and documents incorporated
by reference therein. The Company has filed all SEC Documents as
required on a timely basis and as of their respective filing dates
during the 12 months preceding the date hereof; the Company SEC
Documents since December 31, 2015 complied in all material respects
with the requirements of the Exchange Act and the rules and
regulations of the Securities and Exchange Commission (the
“SEC”)
promulgated thereunder; and none of these Company SEC Documents,
when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made not misleading. The
consolidated financial statements contained in the Company SEC
Documents since December 31, 2017: (i) complied in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
covered, except in the case of unaudited statements as permitted by
Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end
audit adjustments; and (iii) fairly present the consolidated
financial position of the Company and its subsidiaries as of the
respective dates thereof and the consolidated results of operations
cash flows and the changes in shareholders’ equity of the
Company and its subsidiaries for the periods covered
thereby.

 

 

 

-3-

 

 

 

2.6 Capitalization.
The authorized capital stock of the Company, consists of (i)
150,000,000 shares of common stock, par value $0.01 per share, of
the Company (the “Common
Stock”), of which (A) 76,583,701 shares were issued
and outstanding as of the date of this Agreement, and (B) 8,526,403
shares were reserved for issuance upon the exercise or conversion,
as the case may be, of outstanding options, warrants or other
convertible securities as of the date of this Agreement, in each
case, taking into account the reverse split of the Common Stock
that was effected on the date hereof and acknowledging rounding
adjustments for fractional split amounts; and (ii) 10,000,000
shares of preferred stock, of which 15,000 will be issued and
outstanding as of the date of this Agreement (taking into effect
this Offering). All issued and outstanding shares of capital stock
have been duly authorized and validly issued, are fully paid and
non-assessable, have been issued and sold in compliance with the
registration requirements of the federal and state securities laws
or the applicable statutes of limitation have expired, and were not
issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. Except as set forth herein,
in the Certificate of Designations or in the Company SEC Documents
or contemplated by the Agreement and Plan of Merger (the
“Merger
Agreement”) relating to the Merger that is being
consummated contemporaneously with this Offering, there are no (i)
outstanding rights (including, without limitation, preemptive
rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any unissued shares of capital stock or
other equity interest in the Company, or any contract, commitment,
agreement, understanding or arrangement of any kind to which the
Company or any subsidiary is a party and relating to the issuance
or sale of any capital stock or convertible or exchangeable
security of the Company or any subsidiary, other than 1,996,754
options granted to directors and employees of the Company and its
subsidiaries pursuant to its 1998 Stock Option Plan, 2009 Stock
Option Plan or the 2016 Equity Incentive Plan and 1,193,070
warrants that are issued and outstanding; or (ii) obligations of
the Company to purchase redeem or otherwise acquire any of its
outstanding capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof. Except
as disclosed in the Company SEC Documents and as contemplated by
(i) the Merger Agreement, (ii) the Company’s announced
agreement to acquire, through a merger, a specified target company
(the “Acquisition
Agreement”), and (iii) the Company’s common
stock purchase agreement pursuant to which the Company will sell
$5,000,000 of Common Stock contemporaneously with the closing of
the Merger (the “Common
Stock Purchase Agreement”), there are no anti-dilution
or price adjustment provisions, co-sale rights, registration
rights, rights of first refusal or other similar rights contained
in the terms governing any outstanding security of the Company that
will be triggered by the issuance of the Securities and no person
has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company (other than the
rights which have been granted in connection with this Agreement,
the Merger Agreement, the Acquisition Agreement and the Common
Stock Purchase Agreement). 

 

 

 

-4-

 

 

 

2.7 Subsidiaries.
Except as contemplated by the Merger Agreement and except as set
forth in the Company SEC Documents, the Company does not presently
own or control, directly or indirectly, and has no stock or other
interest as owner or principal in, any other corporation or
partnership, joint venture, association or other business venture
or entity (each a “subsidiary”). Each subsidiary is
duly incorporated or organized, validly existing and, if applicable
to the jurisdiction, in good standing under the laws of its
jurisdiction of incorporation or organization and has all requisite
power and authority to carry on its business as now conducted. Each
subsidiary is duly qualified to transact business and is in good
standing in each jurisdiction, except where the failure to be so
qualified or in good standing would not have a Material Adverse
Effect. All of the outstanding capital stock or other securities of
each subsidiary of the Company is owned, either directly or
indirectly by the Company). Except for the liens granted under the
terms of the First Lien Credit Facility (as defined below) and the
Second Lien Credit Facility (as defined below), the capital stock
or other securities of each US subsidiary of the Company is free
and clear of any liens, claims or encumbrances.

 

2.8 Valid
Issuance of Securities. The Securities are duly authorized
and, when issued, sold and delivered and paid for in accordance
with the terms hereof will be duly and validly authorized and
issued, fully paid and non-assessable, free from all taxes, liens,
claims, encumbrances and charges with respect to the issue thereof;
provided, however, that the Securities will be subject to
restrictions on transfer under state and/or federal securities laws
or as otherwise set forth herein or in the Certificate of
Designations. The issuance, sale and delivery of the Securities in
accordance with the terms hereof will not be subject to preemptive
rights of shareholders of the Company.

 

2.9 Offering.
Assuming the accuracy of the representations of the Purchaser in
Section 3.3 of this Agreement on the date hereof, the offer, issue
and sale of the Securities are and will be exempt from the
registration and prospectus delivery requirements of the Securities
Act and have been or will be registered or qualified (or are or
will be exempt from registration and qualification) under the
registration, permit or qualification requirements of all
applicable state securities laws. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that
would require registration under the Securities Act of the issuance
of the Securities to the Purchaser. Other than the Company SEC
Documents, the Company has not distributed any offering materials
in connection with the offering and sale of the Securities. The
Company has not taken any action to sell, offer for sale or solicit
offers to buy any securities of the Company which would bring the
offer, issuance or sale of the Securities within the provisions of
Section 5 of the Securities Act, unless such offer, issuance or
sale was or shall be within the exemptions of Section 4 of the
Securities Act.

 

 

 

-5-

 

 

 

2.10 Litigation.
Except as set forth in the Company SEC Documents or as set forth in
Schedule 2.10,
there is no litigation matter currently threatened against the
Company or any of its subsidiaries that (a) if adversely determined
would reasonably be expected to have a Material Adverse Effect or
(b) would be required to be disclosed in the Company’s Annual
Report on Form 10-K under the requirements of Item 103 of
Regulation S-K. The foregoing includes, without limitation, any
action, suit, proceeding or investigation, pending or threatened,
that questions the validity of this Agreement or the right of the
Company to enter into this Agreement and perform its obligations
hereunder. Except as set forth in Schedule 2.10, neither the
Company nor any subsidiary is subject to any injunction, judgment,
decree or order of any court, regulatory body, arbitral panel,
administrative agency, national securities exchange or other
government body. To the Company’s knowledge, there is no
proceeding or investigation by the Principal Market (as defined
below) pending that could lead to a suspension of listing or
trading of the Common Stock.

 

2.11 Governmental
Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing
with, any federal, state, local or provincial governmental
authority on the part of the Company or any of its subsidiaries is
required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing of the
Certificate of Designations and notices required or permitted to be
filed with the Principal Market or certain state and federal
securities commissions, which notices will be filed on a timely
basis. 

 

2.12 No
Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder’s or other fee or commission in
connection with the transactions contemplated by this Agreement
based on arrangements made by the Company, it being expressly
acknowledged that any fees payable in connection with the
consummation of the Merger substantially simultaneously with this
Offering are not fees to any broker, finder, underwriter or
placement agent for services in connection with this
Offering.

 

2.13 Compliance.
Neither the Company nor any of its subsidiaries is in violation of
its Certificate of Incorporation or Bylaws (or similar
organizational documents). The Company and its subsidiaries, and
their representatives, have been conducting their business in
compliance with all applicable laws, rules and regulations of the
jurisdictions in which they conduct business, including, without
limitation, all applicable local, state and federal environmental
laws and regulations, except where failure to be so in compliance
would not have a Material Adverse Effect. Each of the Company and
its subsidiaries has all necessary franchises, licenses, permits,
certificates and other authorizations from any foreign, federal,
state or local government or governmental agency, department or
body that are currently necessary for the operation of the business
of the Company and its subsidiaries as currently conducted, except
where the failure to currently possess such franchises, licenses,
certificates and other authorizations would not reasonably be
expected to have a Material Adverse Effect.

 

2.14 No
Material Changes. Except as disclosed in the Company SEC
Documents and except for the completion of the Merger and the entry
by the Company into a $595 million first lien credit facilities
(the “First Lien Credit
Facility”) and the $85 million second lien credit
facility (the “Second Lien
Credit Facility”) and the various
transactions contemplated by each of these credit facilities, since
December 31, 2017, there has been no material adverse change in the
assets, liabilities, business, properties, operations, financial
condition or results of operations of the Company and its
subsidiaries, taken as a whole.

 

 

 

-6-

 

 

 

2.15 Intellectual
Property. 

 

(a) The
Company and each of its subsidiaries has ownership or license or
legal right to use, or can acquire on reasonable terms, all patent,
copyright, trade secret, know-how trademark, trade name customer
lists, designs, manufacturing or other processes, computer
software, systems, data compilation, research results or other
proprietary rights used in the business of the Company or such
subsidiary (collectively “Intellectual Property”), except
as such failure to own, license, use or acquire would not result in
a Material Adverse Effect.

 

(b) The
Company and each of its subsidiaries has taken all reasonable steps
required in accordance with sound business practice and business
judgment to establish and preserve its ownership of all material
Intellectual Property with respect to their products and
technology.

 

(c) To
the knowledge of the Company, the present business, activities and
products of the Company and its subsidiaries do not infringe any
intellectual property of any other person, except or where such
infringement would not have a Material Adverse Effect. Except as
set forth in Schedule
2.15(c), no proceeding charging the Company or any of its
subsidiaries with infringement of any adversely held Intellectual
Property is currently pending. To the knowledge of the Company, no
other person is infringing any rights of the Company or its
subsidiaries to the Intellectual Property. 

 

(d) Except
as set forth in Schedule
2.15(c), no proceedings are pending or, to the knowledge of
the Company, threatened, which challenge the rights of the Company
or any of its subsidiaries to the use of the Intellectual Property.
To the knowledge of the Company, the Company and each of its
subsidiaries has the right to use, free and clear of material
claims or rights of other persons, all of its customer lists,
designs, computer software, systems, data compilations, and other
information that are required for its products or its business as
presently conducted. To the knowledge of the Company, neither the
Company nor any of its subsidiaries is making unauthorized use of
any confidential information or trade secrets of any person. The
activities of any of the employees on behalf of the Company or of
any of its subsidiaries do not violate any agreements or
arrangements between such employees and third parties related to
confidential information or trade secrets of third parties or that
restrict any such employee’s engagement in business activity
of any nature.

 

(e) All
material licenses or other agreements under which (i) the Company
or any subsidiary employs rights in Intellectual Property, or (ii)
the Company or any subsidiary has granted rights to others in
Intellectual Property owned or licensed by the Company or any
subsidiary are in full force and effect, and there is no default
(and there exists no condition which, with the passage of time or
otherwise, would constitute a default by the Company or such
subsidiary) by the Company or any subsidiary of the Company with
respect thereto.

 

 

 

-7-

 

 

 

2.16 Accountants.
EisnerAmper LLP, who expressed their opinion with respect to the
consolidated financial statements contained in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2017,
have advised the Company that they are, and to the knowledge of the
Company they are, independent accountants as required by the
Securities Act and the rules and regulations promulgated
thereunder.

 

2.17 Taxes.
The Company and each of its subsidiaries has filed all federal,
state, local and foreign income and franchise tax returns and has
paid all taxes shown as due thereon (except where the failure to
file would not have a Material Adverse Effect). The Company has set
aside on its books adequate provisions for payments of taxes as of
its reporting period. 

 

2.18 Insurance.
The Company and each of its subsidiaries maintains and will
continue to maintain insurance of the types and in the amounts that
the Company reasonably believes is adequate for its business,
including, but not limited to, insurance covering real and personal
property owned or leased by the Company and its subsidiaries
against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against by similarly situated companies,
all of which insurance is in full force and effect.

 

2.19 Transfer
Taxes. On the Closing Date, all stock transfer or other
taxes (other than income taxes) that are required to be paid in
connection with the sale and transfer of the Securities hereunder
will be, or will have been, fully paid or provided for by the
Company and the Company will have complied with all laws imposing
such taxes.

 

2.20 Investment
Company. The Company (including its subsidiaries) is not an
“investment company” or an “affiliated
person” of, or “promoter” or “principal
underwriter” for an investment company, within the meaning of
the Investment Company Act of 1940 and will not be deemed an
“investment company” as a result of the transactions
contemplated by this Agreement.

 

2.21 Related
Party Transactions. To the knowledge of the Company, no
transaction has occurred between or among the Company or any of its
affiliates (including, without limitation, any of its
subsidiaries), officers or directors or any affiliate or affiliates
of any such affiliate, officer or director that with the passage of
time will be required to be disclosed pursuant to Section 13, 14 or
15(d) of the Exchange Act other than those transactions that have
already been so disclosed in the SEC Documents and those
transactions that are in connection with, or contemplated by, the
Merger, the First Lien Credit Facility and the Second Lien Credit
Facility (including the sale of Shares hereunder).

 

2.22 Books
and Records. The books, records and accounts of the Company
and its subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions in, and dispositions of, the assets of,
and the operations of, the Company and its
subsidiaries.

 

 

 

-8-

 

 

 

2.23 Disclosure
Controls and Internal Controls.

 

(a) The
Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 under the
Exchange Act), which (i) are designed to ensure that material
information relating to the Company is made known to the
Company’s principal executive officer and its principal
financial officer by others within the Company particularly during
the periods in which the periodic reports required under the
Exchange Act are being prepared; and (ii) provide for the periodic
evaluation of the effectiveness of such disclosure controls and
procedures as of the end of the period covered by the
Company’s most recent annual or quarterly report filed with
the SEC. 

 

(b) The
Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets
or incurrence of liabilities is permitted only in accordance with
management’s general or specific authorization and (iv) the
recorded accountability for assets and liabilities is compared with
the existing assets and liabilities at reasonable intervals and
appropriate action is taken with respect to any difference. The
Company maintains disclosure controls and procedures (as such term
is defined in Rule 13a-14 under the Exchange Act) that are
effective in ensuring that information required to be disclosed by
the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the Company’s
management, including its principal executive officer or officers
and its principal financial officer or officers, as appropriate, to
allow timely decisions regarding required disclosure. The Company
is not aware of (i) any significant deficiency or material weakness
in the design or operation of its internal controls; or (ii) any
fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s or any
of its subsidiary’s internal controls. 

 

(c) Except
as described in the Company SEC Documents, there are no material
off-balance sheet arrangements (as defined in Item 303 of
Regulation S-K), or any other relationships with unconsolidated
entities (in which the Company or its control persons have an
equity interest) that may have a material current or future effect
on the Company’s or any of its/subsidiary’s financial
condition, revenues or expenses, changes in financial condition,
results of operations, liquidity, capital expenditures or capital
resources.

 

2.24 No
General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D promulgated under the
Securities Act) in connection with the offer or sale of the
Securities.

 

 

 

-9-

 

 

 

2.25 Foreign
Corrupt Practices. Neither the Company nor any of its
subsidiaries nor any director, officer, agent, employee or other
person acting on behalf of the Company or any of its subsidiaries
has, in the course of its actions for, or on behalf of, the Company
(i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; (iii) violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977; or (iv) made any
unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government
official or employee.

 

2.26 Sarbanes-Oxley
Act. The Company is in compliance in all material respects
with any and all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the SEC thereunder
that are effective as of the date hereof.

 

2.27 Employee
Relations. Neither the Company nor any of its subsidiaries
is a party to any collective bargaining agreement. The Company
reasonably believes that its and its subsidiaries’ relations
with its employees are good. Other than as disclosed in the
Company’s Form 14F-1 filed with the SEC, no executive officer
of the Company (as defined in Rule 501(f) of the Securities Act)
has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer’s employment with
the Company. To the knowledge of the Company, no executive officer
of the Company is, or is expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive
officer does not subject the Company to any liability with respect
to any of the foregoing matters. The Company and each of its
subsidiaries is in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse
Effect. 

 

2.28 Disclosure
of Information. The Company confirms that, to its knowledge,
with the exception of the proposed sale of Securities as
contemplated herein (as to which the Company makes no
representation under this Section 2.28) and information
provided with respect to the Merger, the Acquisition Agreement, the
Common Stock Purchase Agreement, the First Lien Credit Facility and
the Second Lien Credit Facility, neither it nor any other person
acting on its behalf has provided the Purchaser or its agents or
counsel with any information that constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchaser shall be relying on the foregoing
representations in effecting transactions in securities of the
Company. All disclosures provided to the Purchaser regarding the
Company, its business and the transactions noted in this Section
2.28 furnished by the Company are true and correct and do not
contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made,
not misleading.

 

 

 

-10-

 

 

 

2.29 Forward-Looking
Information. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act) made by the Company or any of its officers or
directors contained in the SEC Documents, or made available to the
public generally since December 31, 2017, has been made or
reaffirmed without a reasonable basis or has been disclosed other
than in good faith.

 

2.30 No
“Bad Actor” Disqualification. The Company has
exercised reasonable care, in accordance with SEC rules and
guidance, and has conducted a factual inquiry, the nature and scope
of which reflect reasonable care under the relevant facts and
circumstances, to determine whether any Covered Person (as defined
below) is subject to any of the “bad actor”
disqualifications described in Rule 506(d)(1)(i) to (viii) under
the Securities Act (“Disqualification Events”). To the
Company’s knowledge, after conducting such sufficiently
diligent factual inquiries, no Covered Person is subject to a
Disqualification Event, except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3) under the Securities Act. The Company
has complied, to the extent applicable, with any disclosure
obligations under Rule 506(e) under the Securities Act.
“Covered
Persons” are those persons specified in Rule 506(d)(1)
under the Securities Act, including the Company; any predecessor or
affiliate of the Company; any director, executive officer, other
officer participating in the offering, general partner or managing
member of the Company; any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power; any promoter (as defined in Rule 405
under the Securities Act) connected with the Company in any
capacity at the time of the sale of the Securities; and any person
that has been or will be paid (directly or indirectly) remuneration
for solicitation of purchasers in connection with the sale of the
Securities (a “Solicitor”), any general partner
or managing member of any Solicitor, and any director, executive
officer or other officer participating in the offering of any
Solicitor or general partner or managing member of any
Solicitor.

 

3. Representations
and Warranties of the Purchaser. The Purchaser hereby represents and
warrants to the Company as follows:

 

3.1 Legal
Power. The Purchaser has the requisite power and authority
to enter into this Agreement and to carry out and perform its
obligations under the terms of this Agreement. All action on the
Purchaser’s part required for the lawful execution and
delivery of this Agreement have been or will be effectively taken
prior to the Closing.

 

3.2 Due
Execution. This Agreement has been duly authorized, executed
and delivered by the Purchaser, and, upon due execution and
delivery by the Company, this Agreement will be a valid and binding
agreement of the Purchaser, except as rights to indemnity hereunder
may be limited by federal or state securities laws and except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors’ rights generally or by equitable
principles.

 

3.3 Investment
Representations. In connection with the sale and issuance of
the Securities, the Purchaser makes the following
representations:

 

 

 

-11-

 

 

 

(a) Investment
for Own Account. The Purchaser is acquiring the Securities
for its own account, not as nominee or agent, and not with a view
to, or for resale in connection with, any distribution or public
offering thereof within the meaning of the Securities
Act; provided,
however, that by making the representations herein, the Purchaser
does not agree to hold any of the Securities for any minimum or
specific term and reserves the right to dispose of the securities
at any time in accordance with or pursuant to a registration
statement or an exemption from the registration requirements of the
Securities Act.

 

(b) Transfer
Restrictions; Legends. The Purchaser understands that (i)
the Securities have not been registered under the Securities Act;
(ii) the Securities are being offered and sold pursuant to an
exemption from registration, based in part upon the Company’s
reliance upon the statements and representations made by the
Purchaser in this Agreement, and that the Securities must be held
by the Purchaser indefinitely, and that the Purchaser must,
therefore, bear the economic risk of such investment indefinitely,
unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration; (iii) each
Certificate representing Securities will be endorsed or notated
with substantially the following legend until the date the Shares
are eligible for sale without restriction or limitation under Rule
144 under the Securities Act or any successor rule
(“Rule
144”):

 

THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES
ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. UNLESS SOLD
PURSUANT TO EITHER AN EFFECTIVE REGISTRATION STATEMENT OR RULE 144
UNDER THE SECURITIES ACT, THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. 

 

(iv) the Company will instruct any
transfer agent not to register the transfer of the Securities (or
any portion thereof) until the applicable date set forth in clause
(iii) above unless (A) the conditions specified in the foregoing
legends are satisfied, (B) if the opinion of counsel referred to
above is to the further effect that such legend is not required in
order to establish compliance with any provisions of the Securities
Act or this Agreement, (C) if the Purchaser provides the Company
with reasonable assurance, such as through a representation letter,
that the Securities may be sold pursuant to Rule 144 under the
Securities Act, or (D) other reasonably satisfactory assurances of
such nature are given to the Company. If so required by the
Company’s transfer agent, the Company shall cause its counsel
to issue and deliver a legal opinion to the transfer agent to
effect the removal of the restrictive legend contemplated by this
Agreement.

 

 

-12-

 

 

 

The Company acknowledges and agrees
that the Purchaser may from time to time pledge, and/or grant a
security interest in some or all of the Securities pursuant to a
bona fide margin agreement in connection with a bona fide margin
account and, if required under the terms of such agreement or
account, the Purchaser may transfer pledged or secured Securities
to the pledgees or secured parties. Such a pledge or transfer shall
not be subject to approval or consent of the Company and no legal
opinion of legal counsel to the pledgee, secured party or pledgor
shall be required in connection with the pledge, but such legal
opinion may be required in connection with a subsequent transfer
following default by the Purchaser transferee of the pledge. No
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities.

 

Certificates evidencing the Shares
shall not contain any restrictive legend (including the legend set
forth in this Section): (i) following a resale of the Shares under
an effective registration statement covering the Shares, or (ii)
following a sale of such Shares pursuant to Rule 144, or (iii)
while such Shares are eligible for sale under Rule 144 and, with
respect to the Shares, the Purchaser is not and has not been for
three months an affiliate of the Company (as such term is defined
in Rule 144(a)(1)) and such Shares have been held for one year or
more pursuant to the requirements of Rule 144 and any other
requirements under Rule 144 have been satisfied at such time, or
(iv) if such legend is not required under applicable requirements
of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the SEC). Following such time
as restrictive legends are not required to be placed on
Certificates representing Shares, the Company will, no later than
three business days following the delivery by the Purchaser to the
Company or the Company’s transfer agent of a Certificate
representing Shares containing a restrictive legend and such other
documentation and representations as the Company, its legal counsel
or any transfer agent may reasonably request to confirm compliance
with the preceding sentence as applicable (provided, however, that
neither the Company nor its legal counsel will require a legal
opinion in connection with any sale pursuant to Rule 144), deliver
or cause to be delivered to the Purchaser a Certificate
representing such Shares that is free from all restrictive legends.
The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the
restrictions on transfer set forth in this Section.

 

The Purchaser agrees that the
removal of the restrictive legend from Certificates representing
Shares as set forth in this Section 3.3(b) is predicated upon the
Company’s reliance that the Purchaser will sell any Shares
pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or
an exemption therefrom.

 

(c) Financial
Sophistication; Due Diligence. The Purchaser has such
knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment in
connection with the transactions contemplated in this Agreement.
The Purchaser has, in connection with its decision to purchase the
Securities, relied only upon the representations and warranties
contained herein and the information contained in the Company SEC
Documents. Further, the Purchaser has had such opportunity to
obtain additional information and to ask questions of, and receive
answers from, the Company, concerning the terms and conditions of
the investment and the business and affairs of the Company, as the
Purchaser considers necessary in order to form an investment
decision.

 

 

 

-13-

 

 

 

(d) Accredited
Investor Status. The Purchaser is an “accredited
investor” as such term is defined in Rule 501(a) of the rules
and regulations promulgated under the Securities Act.

 

(e) Residency.
The Purchaser is organized under the laws of the jurisdiction set
forth beneath the Purchaser’s name on the signature page
attached hereto, and its principal place of operations is in the
state set forth beneath the Purchaser’s name on the signature
page attached hereto.

 

(f) General
Solicitation. The Purchaser is not purchasing the Securities
as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over the television or radio
or presented at any seminar or any other general solicitation or
general advertisement.

 

3.4 No
Investment, Tax or Legal Advice. The Purchaser understands
that nothing in the Company SEC Documents, this Agreement, or any
other materials presented to the Purchaser in connection with the
purchase and sale of the Securities constitutes legal, tax or
investment advice. The Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of
Securities.

 

3.5 Additional
Acknowledgement. The Purchaser acknowledges that it has
independently evaluated the merits of the transactions contemplated
by this Agreement, that it has independently determined to enter
into the transactions

 

4. Conditions
to Closing.

 

4.1 Conditions
to Obligations of Purchaser at Closing. The
Purchaser’s obligation to purchase the Securities at the
Closing is subject to the fulfillment, on or prior to the Closing,
of all of the following conditions, any of which may be waived by
the Purchaser:

 

(a) Representations
and Warranties True; Performance of Obligations. The
representations and warranties made by the Company in Section 2
shall be true and correct in all material respects (or, where the
representation and warranty itself is qualified by materiality, it
shall be true and correct in all respects) on the Closing Date with
the same force and effect as if they had been made on and as of
said date (except to the extent that any such representation and
warranty expressly speaks as of an earlier date, in which case such
representation and warranty shall be so true and correct as of such
earlier date), and the Company shall have performed and complied
with all obligations and conditions herein required to be performed
or complied with by it on or prior to the Closing, including, but
not limited to, those obligations and conditions set forth in
Sections 4.1(c), 4.1(f), 4.1(g), 4.1(h), and 4.1(i), and if the
Closing date is subsequent to the date hereof, a certificate duly
executed by an officer of the Company, to the effect of the
foregoing, shall be delivered to the Purchaser. The delivery of
such certificate shall evidence the satisfaction of the conditions
set forth in this Section 4.1.

 

 

 

-14-

 

 

 

(b) Proceedings
and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and
all documents and instruments incident to such transactions shall
be reasonably satisfactory in substance and form to counsel to the
Purchaser, and counsel to the Purchaser shall have received all
such counterpart originals or certified or other copies of such
documents as they may reasonably request. The Company shall have
delivered (or caused to have been delivered) to the Purchaser, the
Certificate(s) required by this Agreement. 

 

(c) Qualifications,
Legal Investment. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with
the lawful sale and issuance of the Securities shall have been duly
obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Securities shall
have been issued and no proceedings for such purpose shall be
pending or, to the knowledge of the Company, threatened by the SEC,
or any commissioner of corporations or similar officer of any state
having jurisdiction over this transaction. At the time of the
Closing, the sale and issuance of the Securities shall be legally
permitted by all laws and regulations to which the Company is
subject. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered,
promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby
which prohibits the consummation of any of the transactions
contemplated by this Agreement.

 

(d) Execution
of Agreement. The Company shall have executed this Agreement
and have delivered this Agreement to the Purchaser.

 

(e) Certificate
of Designations. The Certificate of Designations shall have
been filed with the Secretary of State.

 

(f) Payment
of Closing Fee. The Company shall have delivered to the
Purchaser a closing fee of $200,000, payable by offsetting such
amount from the Purchase Price.

 

(g) Market
Listing. The Company will comply with all of the
requirements of the Financial Industry Regulatory Authority, Inc.
and the Nasdaq Stock Market with respect to the issuance of the
Securities.

 

(h) Blue
Sky. The Company shall have obtained all necessary
“blue sky” law permits and qualifications, or have the
availability of exemptions therefrom, required by any state for the
offer and sale of the Securities.

 

(i) Material
Adverse Change. Since the date of this Agreement, there
shall not have occurred any event which results in a Material
Adverse Effect.

 

(j) Merger.
The Merger and the transactions related thereto shall be
consummated in accordance with the Merger Agreement, including the
financings contemplated by the First Lien Credit Facility and the
Second Lien Credit Facility, contemporaneously with the
Offering.

 

 

 

-15-

 

 

 

4.2 Conditions
to Obligations of the Company. The Company’s
obligation to issue and sell the Securities at the Closing is
subject to the fulfillment, on or prior to the Closing, of the
following conditions, any of which may be waived by the
Company:

 

(a) Representations
and Warranties True. The representations and warranties made
by the Purchaser in Section 3 shall be true and correct in all
material respects (or, where the representation and warranty itself
is qualified by materiality, it shall be true and correct in all
respects) on the Closing Date with the same force and effect as if
they had been made on and as of said date (except to the extent
that any such representation and warranty expressly speaks as of an
earlier date, in which case such representation and warranty shall
be so true and correct as of such earlier date).

 

(b) Performance
of Obligations. The Purchaser shall have performed and
complied with all agreements and conditions herein required to be
performed or complied with by them on or before the Closing. The
Purchaser shall have delivered the Purchase Price, by wire
transfer, to the account designated by the Company for such
purpose. 

 

(c) Qualifications,
Legal Investment. All authorizations, approvals, or permits,
if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with
the lawful sale and issuance of the Securities shall have been duly
obtained and shall be effective on and as of the Closing. No stop
order or other order enjoining the sale of the Securities shall
have been issued and no proceedings for such purpose shall be
pending or, to the knowledge of the Company, threatened by the SEC,
or any commissioner of corporations or similar officer of any state
having jurisdiction over this transaction. At the time of the
Closing, the sale and issuance of the Securities shall be legally
permitted by all laws and regulations to which the Company is
subject. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered,
promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby
which prohibits the consummation of any of the transactions
contemplated by this Agreement.

 

(d) Execution
of Agreement. The Purchaser shall have executed this
Agreement and delivered this Agreement to the Company.

 

(e) Merger.
The Merger and the transactions related thereto shall be
consummated in accordance with the Merger Agreement, including the
financings contemplated by the First Lien Credit Facility and the
Second Lien Credit Facility, contemporaneously with the
Offering.

 

4.3 Termination
of Obligations to Effect Closing; Effect.

 

(a) Termination.
The obligations of the Company, on the one hand, and the Purchaser,
on the other hand, to effect the Closing shall terminate as
follows:

 

(i) Upon the mutual written consent of the Company
and the Purchaser;

 

 

 

-16-

 

 

 

(ii) By the Company if any of the conditions set
forth in Section 4.2 shall have become incapable of fulfillment,
and shall not have been waived by the Company;

 

(iii) By the Purchaser if any of the conditions set
forth in Section 4.1 shall have become incapable of fulfillment,
and shall not have been waived by the Purchaser; or

 

(iv) By either the Company or the Purchaser if the
Closing has not occurred on or prior to May 15,
2018; provided, however, that, in the case of clause (iii)
above and clause (iv) with respect to the Company, the party
seeking to terminate its obligation to effect the Closing shall not
then be in breach of any of its representations, warranties,
covenants, or agreements contained in this Agreement if such breach
has resulted in the circumstances giving rise to such party’s
seeking to terminate its obligation to effect the
Closing.

 

(b) Effect
of Termination. Nothing in this Section 4.3 shall be deemed
to release any party from any liability for any breach by such
party of the terms and provisions of this Agreement or to impair
the right of any party to compel specific performance by any other
party of its obligations under this Agreement. 

 

5. Additional
Covenants.

 

5.1 Reporting
Status. With a view to making available to the Purchaser the
benefits of certain rules and regulations of the SEC which may
permit the sale of the Shares to the public without registration,
the Company agrees to use its reasonable best efforts to file with
the SEC, in a timely manner, all reports and other documents
required of the Company under the Exchange Act. The Company will
otherwise take such further action as the Purchaser may reasonably
request, all to the extent required from time to time, to enable
the Purchaser to sell the Shares without registration under the
Securities Act or any successor rule or regulation adopted by the
SEC.

 

5.2 Protection
of Exemptions. The Company will not, for a period of six
months following the Closing Date offer for sale or sell any
securities unless, in the opinion of the Company’s counsel,
such offer or sale does not jeopardize the availability of
exemptions from the registration and qualification requirements
under applicable securities laws with respect to the Offering.
Except for the issuance of stock options under the Company’s
stock option plans, the issuance of common stock upon exercise of
outstanding options and warrants, the issuance of common stock
purchase warrants, the issuance of Common Stock pursuant to the
Merger Agreement or the Acquisition Agreement, the Common Stock
Purchase Agreement, the Company’s public offering of Common
Stock consummated on February 5, 2018 and the offering contemplated
hereby, the Company has not engaged in any offering of equity
securities during the six (6) months prior to the date of this
Agreement. The foregoing provisions of this Section 5.2 shall not
prevent the Company from filing a “shelf” registration
statement pursuant to Rule 415 under the Securities Act, but the
foregoing provisions shall apply to any sale of securities
thereunder.

 

 

 

-17-

 

 

 

5.3 Form D
and State Securities Filings. The Company will file with the
SEC a Notice of Sale of Securities on Form D with respect to
the Securities, as required under Regulation D under the
Securities Act, no later than 15 days after the Closing Date. The
Company will promptly and timely file all documents and pay all
filing fees required by any states’ securities laws in
connection with the sale of Securities.

 

5.4 Resale
Registration. The Company will file with the SEC the resale
registration statement (the “Resale Registration Statement”)
required in connection with the registration rights agreement being
entered into between the Company and Birch pursuant to the Merger
Agreement no later than five (5) business days after the Closing;
provided, that such timing shall be subject to the Company’s
receipt of documents and information required for filing the Resale
Registration Statement that are out of the Company’s
reasonable control on a timely basis prior to such deadline,
including, but not limited to, descriptive and other information
about Birch and its business and operations, risk factors relating
to Birch’s business and operations, input to the “Plan
of Distribution” section of the Resale Registration
Statement, the consent of the auditor of Birch’s financial
statement, and financial statements of Birch required to be filed
with or incorporated by reference into the Resale Registration
Statement (including pro forma financial statements of Birch and
Fusion on a consolidated basis). To the extent any such document or
information is not available, and out of the Company’s
reasonable control, the Company will use its reasonable best
efforts to obtain such documents and information and file the
Resale Registration Statement, as promptly as
possible.

 

6. Miscellaneous.

 

6.1 Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard
to the choice of law provisions thereof, and the federal laws of
the United States.

 

6.2 Successors
and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators
of the parties hereto. Notwithstanding the foregoing, the Company
may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the
Purchaser.

 

6.3 Entire
Agreement. This Agreement and the exhibits hereto, and the
other documents delivered pursuant hereto, constitute the full and
entire understanding and agreement among the parties with regard to
the subjects hereof and no party shall be liable or bound to any
other party in any manner by any representations, warranties,
covenants, or agreements except as specifically set forth herein or
therein. Nothing in this Agreement, express or implied, is intended
to confer upon any party, other than the parties hereto and their
respective successors and assigns, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement,
except as expressly provided herein. 

 

 

 

-18-

 

 

 

6.4 Severability.
In the event any provision of this Agreement shall be invalid,
illegal, or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to
retain as nearly as practicable the intent of the parties, and the
validity, legality, and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.

 

6.5 Amendment
and Waiver. Except as otherwise provided herein, any term of
this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular
instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely), with the written consent
of the Company and the Purchaser. Any amendment or waiver effected
in accordance with this Section 6.5 shall be binding upon each
future holder of any of the Securities purchased under this
Agreement and the Company.

 

6.6 Fees
and Expenses. Except as otherwise set forth herein, the
Company and the Purchaser shall bear their own expenses and legal
fees incurred on their behalf with respect to this Agreement and
the transactions contemplated hereby. Each party hereby agrees to
indemnify and to hold harmless of and from any liability the other
party for any commission or compensation in the nature of a
finder’s fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted
liability) for which such indemnifying party or any of its
employees or representatives are responsible.

 

6.7 Notices.
All notices, requests, consents and other communications hereunder
shall be in writing, shall be delivered, if within the United
States, by first-class registered or certified airmail, or
nationally recognized overnight express courier, postage prepaid,
and shall be addressed as follows, or to such other address or
addresses as may have been furnished in writing by a party to
another party pursuant to this paragraph:

 

● 

if to the Company, to the address of the
Company’s principal office set forth on the first page of
this Agreement, Attention: James P. Prenetta, Jr., EVP and General
Counsel, e-mail: jprenetta@fusionconnect.com with a copy to (which
shall not constitute notice to the Company) Kelley Drye &
Warren LLP, 101 Park Avenue, New York, New York 10178, Attention:
Carol Weiss Sherman, e-mail: csherman@kelleydrye.com
and

 

● 

if to the Purchaser, at its address on the
signature page to this Agreement.

 

6.8 Survival
of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this
Agreement, all covenants, agreements, representations and
warranties made by the Company and the Purchaser herein shall
survive the execution of this Agreement, the delivery to the
Purchaser of the Securities being purchased and the payment
therefor, and a party’s reliance on such representations and
warranties shall not be affected by any investigation made by such
party or any information developed thereby.

 

 

 

-19-

 

 

 

6.9 Counterparts.
This Agreement may be executed by pdf signature and in any number
of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one instrument.

 

6.10 Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

 

 

 

[The Remainder of this Page is Blank; Signature Pages
Follow]

 

 

-20-

 

In witness whereof, the foregoing
Preferred Stock Purchase Agreement is hereby executed as of the
date first above written. 

 

	
 

	

FUSION CONNECT,
INC.

	
 

	
 

	
 

	

By:

	

/s/ James P. Prenetta,
Jr.

	
 

	

Name:

	

James P. Prenetta, Jr.

	
 

	

Title:

	

Executive Vice President and General
Counsel

 

-21-

 

In witness whereof, the foregoing
Preferred Stock Purchase Agreement is hereby executed as of the
date first above written. 

 

	
 

	

 Holcombe T. Green,
Jr.

	
 

	

Name of Investor

	
 

	
 

	
 

	

By:

	

 /s/ Holcombe T. Green,
Jr.

	
 

	

Name:

	
 

	
 

	

Title:

	
 

 

 

	
 

	

Tax Identification No.:

	
 

 

	
 

	

Jurisdiction of
Organization:

	

 Georgia

 

	
 

	

Jurisdiction of Principal Place of
Operations:

	
 

	

Georgia

	
 

	
 

	
 

	

Address for Notice:

	
 

	

3060 Peachtree Rd.,
N.W.

	
 

	

Suite 1065

	
 

	

Atlanta, Georgia
30305 

	
 

	

Attention: Holcombe T. Green,
Jr.

 

 

-22-

 

 

 

 

 

Exhibit A

 

Certificate of
Designations of the Series D Cumulative Preferred
Stock

 

(attached)

 

 

-23-

 

 

FUSION CONNECT,
INC.

 

 

CERTIFICATE
OF

 

DESIGNATION OF
PREFERENCES,

 

RIGHTS AND
LIMITATIONS

 

OF

 

SERIES D
CUMULATIVE PREFERRED STOCK

 

 

 

Pursuant to Section 151 of the
Delaware General Corporation Law and Article IV of the Amended and
Restated Certificate of Incorporation (the “Certificate of
Incorporation”) of Fusion Connect, Inc., a corporation
organized and existing under the laws of the State of Delaware (the
“Corporation”),
the Corporation hereby certifies that the following resolution was
duly adopted by the board of directors of the Corporation (the
“Board”)
effective as of May [●], 2018, pursuant to the authority
conferred upon the Board by the Certificate of Incorporation, which
authorizes the issuance of up to 10,000,000 shares of preferred
stock, par value $0.01 per share:

 

RESOLVED, that the designation of
100,000 shares of a new series
of preferred stock of the Corporation, designated as the Series D
Cumulative Preferred Stock, out of the authorized and unissued
shares of preferred stock, par value $0.01 per share, of the
Corporation, with the rights and preferences set forth herein, be,
and hereby is, approved:

 

 

 

I.            

Designation and
Amount

 

Of the 10,000,000 shares of
preferred stock authorized pursuant to Article IV of the
Certificate of Incorporation, 100,000 are hereby designated as
Series D Cumulative Preferred Stock, par value $0.01 per share (the
“Series D Preferred
Stock”). Each share of Series D Preferred Stock shall
have a stated value of $1,000 per share (the “Stated
Value”). Subject to Article IV, such number of
shares may be increased or decreased by resolution of the Board and
by the filing of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware stating that such
reduction or increase has been so authorized; provided, however, that no decrease will
reduce the number of shares of Series D Preferred Stock to a
number less than the number of shares then outstanding, plus the
number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible
into Series D Preferred Stock.

 

 

 

-24-

 

 

 

II.            

Dividends

 

Dividends on each share of Series D
Preferred Stock shall accrue on a monthly basis at the rate of 12%
per annum of the sum of the Stated Value plus all accumulated and
unpaid dividends thereon from and including the date of issuance of
such share to and including the date on which the Stated Value of
such share (plus all accrued and unpaid dividends thereon) is paid
to the holder thereof in connection with a Liquidation Event (as
defined herein) or the redemption of such share by the Corporation.
Such dividends shall accrue whether or not they have been declared
and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. All
accrued and unpaid dividends on each share of Series D Preferred
Stock shall be paid, at the option of the Corporation, in cash or
in kind with shares of Series D Preferred Stock on the last
business day of each calendar month; provided that dividends may
only be paid in cash after all obligations of the Corporation and
its subsidiaries under each of the New Credit Facilities (excluding
contingent obligations as to which no claim has been made) have
been paid in full in cash, all commitments to extend credit
thereunder have been terminated and no letter of credit shall be
outstanding thereunder. For purposes of dividends paid in kind, (i)
the number of shares of Series D Preferred Stock payable in respect
thereof shall be determined using a per share price of $1,000
(adjusted appropriately for stock splits, stock dividends,
recapitalizations, consolidations, mergers and the like with
respect to the Series D Preferred Stock) and (ii) in lieu of a
fractional share of Series D Preferred Stock as a dividend, the
Corporation shall issue a whole share of Series D Preferred Stock
(rounded up to the nearest whole share).

 

III.            

Liquidation

 

(a) Upon any liquidation, dissolution or winding up
of the Corporation (whether voluntary or involuntary) (a
“Liquidation
Event”), each holder of Series D Preferred Stock shall
be entitled to be paid, before any distribution or payment is made
upon any shares of Common Stock or other Junior Stock, an amount in
cash equal to the aggregate Stated Value of all shares of Series D
Preferred Stock held by such holder (plus all accrued and unpaid
dividends thereon), and the holders of Series D Preferred Stock
shall thereafter not be entitled to any further payment. If upon
any such liquidation, dissolution or winding up of the Corporation,
the Corporation’s assets to be distributed among the holders
of the Series D Preferred Stock are insufficient to permit payment
to such holders of the aggregate amount that they are entitled to
be paid under this Article
III, then the assets available to be distributed to the
holders of Series D Preferred Stock shall be distributed pro rata
among such holders based upon the aggregate Stated Value (plus all
accrued and unpaid dividends) of the Series D Preferred Stock held
by each such holder.

 

 

 

-25-

 

 

 

(b) For purposes of this Article III, a
“Liquidation Event” shall be deemed to include, (i) the
acquisition of the Corporation by another entity by means of any
transaction or series of related transactions to which the
Corporation is party (including, without limitation, any stock
transaction, reorganization, merger or consolidation) other than a
transaction or series of related transactions in which the holders
of the voting securities of the Corporation outstanding immediately
prior to such transaction or series of related transactions retain,
immediately after such transaction or series of related
transactions, as a result of shares in the Corporation held by such
holders prior to such transaction or series of related
transactions, at least a majority of the total voting power
represented by the outstanding voting securities of the Corporation
or such other surviving or resulting entity (or if the Corporation
or such other surviving or resulting entity is a wholly-owned
subsidiary immediately following such acquisition, its parent); and
(ii) a sale, lease or other disposition of all or substantially all
of the assets of the Corporation and its subsidiaries taken as a
whole by means of any transaction or series of related
transactions, except where such sale, lease or other disposition is
to a wholly-owned subsidiary of the Corporation.

 

IV.            

Redemptions

 

(a) The Corporation may at any time and from time to
time, on a pro rata basis, but only after the payment in full in
cash of the Deferred Fees, redeem all or any portion of the shares
of Series D Preferred Stock then outstanding. Upon any such
redemption, the Corporation shall pay a price per share equal to
the Stated Value thereof (plus all accrued and unpaid dividends
thereon). Such redemption shall take place on a date fixed by the
Corporation.

 

(b) At any time after the date that the first share
of Series D Preferred Stock is issued and at such time as any share
of Series D Preferred Stock is issued and outstanding, but only
after the payment in full in cash of the Deferred Fees, upon the
sale by the Corporation of any of its equity securities for cash,
the Corporation shall use the net cash proceeds of such sale to
redeem all the shares of Series D Preferred Stock then issued and
outstanding or, if such proceeds are less than the amount required
to redeem all such issued and outstanding shares of Series D
Preferred Stock, the maximum amount of shares of Series D Preferred
Stock that can be redeemed using such proceeds, in each case, at a
price per share equal to the Stated Value thereof (plus all accrued
and unpaid dividends thereon).

 

(c) The Corporation shall provide written notice of
each redemption of shares of Series D Preferred Stock to each
record holder thereof not more than 30 nor less than five days
prior to the date on which such redemption is to be
made.

 

(d) If less than all the shares of Series D
Preferred Stock are to be redeemed, the number of shares of Series
D Preferred Stock to be redeemed from each holder thereof shall be
the number of shares determined by multiplying the total number of
shares of Series D Preferred Stock to be redeemed by a fraction,
the numerator of which shall be the total number of shares of
Series D Preferred Stock then held by such holder and the
denominator of which shall be the total number of shares of Series
D Preferred Stock then outstanding.

 

 

 

-26-

 

 

 

V.            

Voting
Rights

 

Except as otherwise provided by law
or under Article VI hereof, holders of shares of Series D Preferred
Stock will have no voting rights.

 

VI.            

Certain
Restrictions

 

(a) Whenever dividends payable on the Series D
Preferred Stock are in arrears, thereafter and until all accrued
and unpaid dividends, whether or not declared, on shares of Series
D Preferred Stock outstanding have been paid in full, the
Corporation will not, without the written consent of holders of a
majority of the then issued and outstanding shares of Series D
Preferred Stock:

 

(i) declare or pay dividends, or make any other
distributions, on any shares of Junior Stock (either as to
dividends or upon a Liquidation Event);

 

(ii) declare or pay dividends, or make any other
distributions, on any shares of stock of the Corporation ranking
pari passu (either as to
dividends or upon a Liquidation Event) with the shares of Series D
Preferred Stock;

 

(iii) redeem, purchase or otherwise acquire for
consideration shares of any Junior Stock; or

 

(iv) redeem, purchase or otherwise acquire for
consideration any shares of stock of the Corporation ranking
pari passu with the shares
of Series D Preferred Stock.

 

(b) The Corporation will not, without the prior
written consent of holders of a majority of the then issued and
outstanding shares of Series D Preferred Stock:

 

(i) amend, alter or repeal the rights, preferences
or privileges of the Series D Preferred Stock (including by way of
amendment of the Certificate of Incorporation or this Certificate
of Designation, including in connection with a
merger);

 

(ii) increase or decrease the authorized number of
shares of the Series D Preferred Stock;

 

(iii) authorize, create (by reclassification or
otherwise) or issue shares of any class or series of equity
securities of the Corporation that is senior or pari passu to the Series D Preferred
Stock;

 

(iv) take any action that results in the redemption
of any shares of Common Stock or other equity securities of the
Corporation, other than the outstanding shares of Series D
Preferred Stock;

 

 

 

-27-

 

 

(v) issue additional shares of Series D Preferred
Stock (except in respect of in kind dividends or distributions
pursuant to this Certificate of Designation);

 

(vi) authorize, enter into an agreement with respect
to, or effect any Liquidation Event that does not result in the
redemption in full of the Series D Preferred Stock pursuant to the
terms of this Certificate of Designation;

 

(vii) amend or waive any provision of the Certificate
of Incorporation, the bylaws of the Corporation or this Certificate
of Designation in a manner that is adverse in any respect to the
holders of the Series D Preferred Stock; or

 

(viii) enter into any commitment to do any of the
foregoing.

 

VII.            

Reacquired
Shares

 

Any shares of Series D Preferred
Stock redeemed or otherwise acquired by the Corporation in any
manner whatsoever will be retired and canceled promptly after the
acquisition thereof. All such shares will upon their cancellation
become authorized but unissued shares of preferred stock and may be
reissued as part of a new series of preferred stock subject to the
conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other preferred stock
Certificate of Designation creating a series of preferred stock or
any similar stock or as otherwise required by law.

 

VIII.                       

Rank

 

The Series D Preferred Stock ranks,
with respect to the payment of dividends and the distribution of
assets, junior to all other series of the Corporation’s
preferred stock existing on the date that the first share of Series
D Preferred Stock is issued.

 

IX.            

Definitions

 

For purposes hereof, the following
terms will have the following meanings:

 

“Deferred Fees”
means $4.0 million in aggregate of fees that are (i) owed by the
Corporation to Goldman Sachs Lending Partners LLC in connection
with the New Credit Facilities and/or (ii) owed by BCHI to Moelis
& Company in connection with financial advisory services
provided by it to BCHI in connection with the Merger
Agreement.

 

“Junior Stock”
shall mean the Common Stock and any other class or series of stock
of the Corporation ranking junior to the Series D Preferred Stock
in respect of the right to receive dividends and distributions or
in respect of the right to receive assets upon the liquidation,
dissolution or winding up of the Corporation.

 

“Merger
Agreement” shall mean the Agreement and Plan of
Merger, dated August 26, 2017, as amended, by and among the
Corporation, Fusion BCHI Acquisition LLC, a wholly-owned subsidiary
of the Corporation (“BCHI”), and Birch Communications
Holdings, Inc.

 

 

 

-28-

 

 

 

“New Credit
Facilities” shall mean the First Lien Credit and
Guaranty Agreement and the Second Lien Credit and Guaranty
Agreement, each dated as of the date hereof, among the Corporation,
as borrower, certain subsidiaries of the Corporation party thereto,
as guarantor subsidiaries, the lenders party thereto and Wilmington
Trust, National Association, as administrative agent and collateral
agent.

 

“Senior Stock”
shall mean any class or series of stock of the Corporation issued
after the date on which the first share of Series D Preferred Stock
is issued ranking senior to the Series D Preferred Stock in respect
of the right to receive dividends and distributions and in respect
of the right to receive assets upon the liquidation, dissolution or
winding up of the affairs of the Corporation.

 

 

 

[Signature Page
Follows]

 

 

-29-

 

IN
WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation by its Executive Vice President and
General Counsel this ___ day of May
2018.

 

	
 

	

FUSION CONNECT, INC.

By:       
                 
                 
                 
        
         

Name:
James P. Prenetta, Jr. 

Title:
Executive Vice President and General
Counsel

	
 

	
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-30-

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