EXHIBIT 2.1
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
This Amended and Restated Stock Purchase Agreement is entered into on this
3 day of April, 2003, by and between Frontline Communications Corp., a Delaware
corporation ("Buyer" or "Frontline"); Proyecciones y Ventas Organizadas, S.A. de
C.V., a corporation organized under the laws of the Republic of Mexico
("Provo"); Xxxxxxx Xxxxxxxx del Rio Xxxxxxx ("Requejo"); and Xxxxxxx Xxxxxxxx
del Rio Arrangoiz ("Arrangoiz") (Provo, Requejo and Xxxxxxxxx shall be referred
to in the singular as "Seller" and collectively as "Sellers").
RECITALS
WHEREAS, Arrangoiz and Requejo own all the issued and outstanding capital
stock of Provo ("Provo Shares"); and
WHEREAS, Buyer wishes to purchase the Provo Shares and ultimately give
Buyer's common stock therefor, subject to certain terms and conditions described
herein; and
WHEREAS, Arrangoiz and Requejo are willing to sell the Provo Shares to
Buyer, subject to certain terms and conditions described herein; and
WHEREAS, the Buyer and Sellers are parties to a Stock Purchase Agreement
dated January 24, 2003 as amended by (i) the Addendum to Stock Purchase and
Acquisition Agreement, dated February 27, 2003 and (ii) the Second Addendum to
Stock Purchase and Acquisition Agreement, dated March 11, 2003 (collectively,
the "Original Agreement"), and
WHEREAS, the parties wish to amend certain terms of the Original Agreement,
NOW, THEREFORE, in consideration of the above recitals, the promises herein
contained and such other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree that the Original
Agreement shall be amended and restated in its entirety to read as follows:
ARTICLE I
Section 1.01. Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Agreement" shall mean this Stock Purchase and Acquisition
Agreement including any appendices, schedules and exhibits.
(b) "Best knowledge" and similar phrases shall mean (i) in the case of
a natural person, the particular fact was known or not known, as the context
requires, to such person after reasonable investigation and inquiry by such
person, and (ii) in the case of entity, the particular fact was known or not
known, as the context requires, to any executive officer of such entity after
reasonable investigation and inquiry by the principal executive officers of such
entity.
(c) "Certificates of Designation" shall mean (i) that certain
Certificate of Designation of Series, and Determination of Rights and
Preferences of Series C Preferred Stock, substantially in the form of Exhibit D,
and (ii) that certain Certificate of Designation of Series, and Determination of
Rights and Preferences of Series D Preferred Stock, substantially in the form of
Exhibit E to be executed and filed by the Buyer on the Closing Date.
(d) "Closing" shall mean the closing of the transactions contemplated
by this Agreement, which shall occur at 10:00 A.M., local time, on the Closing
Date in the offices of Xxxxxxx Berlin Shereff Xxxxxxxx, LLP, the Chrysler
Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, or at such other time
and place as shall be agreed in writing among the parties.
(e) "Closing Date" shall mean April 1, 2003, or such other date as
agreed upon, in writing, among the parties.
(f) "Conversion Date" shall mean the date which is the later of: (i)
the date on which the Series C Preferred and Series D Preferred (as defined
below) converts to common stock of the Buyer, in accordance with section 3.03 or
(ii) May 15, 2003, or such later date as agreed upon in writing by the Holders
of a majority of the Series C Preferred. In the event the Conversion Date is
delayed due to the actions or inaction of the Commission or AMEX the Conversion
Date shall be extended for a period of up to thirty (30) additional days.
(g) "Debt" shall mean Frontline's senior secured obligation to pay
Sellers the aggregate principal amount of twenty million Dollars ($20,000,000),
in the terms and subject to the conditions of the Note and the Security
Agreement.
(h) "Dollar" or "Dollars" shall mean United States dollars.
(i) "Encumbrance" shall mean any lien, security interest, claim or any
other hindrance whatsoever.
(j) "Exchange Act" shall mean the United States Securities Exchange
Act of 1934, as amended.
(k) "Financial Statements" shall have the meaning set forth in Section
6.01(k).
(l) "GAAP" shall mean the generally accepted accounting principles
applicable in the United States.
(m) "Intellectual Property" shall mean (i) all inventions (patentable
or unpatentable) including all improvements thereto, (ii) all trademarks, trade
names, service marks or service names, copyrights, trade dress, logos and
corporate names, including all good will associated therewith, and (iii) all
trade secrets and confidential information.
(n) "Note" shall mean that certain Secured Promissory Note
substantially in the form attached hereto as Exhibit F to be executed by Buyer
on the Closing Date.
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(o) "Person" shall mean an individual, corporation, partnership, joint
venture, trust, association, unincorporated organization or other entity or
governmental body or subdivision, agency, commission or authority thereof, or
any equivalent entity under applicable law.
(p) "Registration Rights Agreement" shall mean that certain
Registration Rights Agreement substantially in the form attached hereto as
Exhibit G to be entered into by and between Buyer and Sellers on the Closing
Date.
(q) "SEC" or "Commission" shall mean the Securities and Exchange
Commission.
(r) "Securities Act" shall mean the United States Securities Act of
1933, as amended.
(s) "Security Agreement" shall mean that certain Security Agreement
substantially in the form of Exhibit H to be entered into by and among Sellers
and Buyer on the Closing Date.
(t) "Transaction Documents" shall collectively mean this Agreement,
the Registration Rights Agreement, the Certificates of Designations, the Note,
the Security Agreement and any other written agreement signed by the parties
that is expressly identified as a "Transaction Document" hereunder, and any
exhibits or attachments to any of the foregoing, as the same may be amended from
time to time.
ARTICLE II
STOCK PURCHASE
Section 2.01. Stock Purchase.
(a) Subject to the terms of this Agreement, Buyer hereby agrees to purchase
and Arrangoiz and Requejo hereby agree to sell to Buyer all of the Provo Shares.
The Provo Shares shall be fully paid, non-assessable and free of any and all
Encumbrances. Upon Closing, Provo will become a wholly owned subsidiary of Buyer
and shall continue in existence.
(b) It is understood by the parties that Provo, Arrangoiz and Requejo may
require certain documents to assist its accountants in obtaining tax free
treatment in Mexico of the above described stock purchase and the Buyer agrees
to provide such assistance.
ARTICLE III
CONSIDERATION
Section 3.01. Consideration to Arrangoiz and Requejo.
(a) In return for the sale of all right, title and interest in the Provo
Shares, Arrangoiz and Requejo will receive an aggregate total of two hundred and
twenty thousand (220,000) shares of Series C Convertible Preferred Stock (the
"Series C Preferred") of Buyer and said shares shall be
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fully paid, non-assessable and free of any and all Encumbrances. The parties
agree that the purchase price for the Provo Shares shall be P$123.20 Mexican
Pesos per share and that the exchange rate used for all transactions hereunder
shall be P$11.20 Mexican Peso : US$1 Dollar. Consequently, the tax basis for the
Series C Preferred shall be $9.60 Dollars per share of Series C Preferred. The
terms of the Series C Preferred shall be set forth in the Certificate of
Designation of Series C Convertible Preferred Stock (the "Series C Certificate
of Designation").
(b) In the event that the Buyer is unable to obtain the Requisite Approvals
from its shareholders of the Actions (as those terms are defined in the Series C
Certificate of Designation), the consideration to Sellers shall be increased by
Twenty Million Dollars ($20,000,000), in order to compensate the Sellers for the
fact that the Series C Preferred will not convert into shares of common stock
par value $.01 per share (the "Common Stock") of the Buyer. The additional
consideration shall be in the form of the Note, and shall be secured by the
Security Agreement. Buyer shall issue and deliver the Note and Security
Agreement to Sellers at the Closing, however, the obligations under the Note
shall only become effective on the Conversion Date and if the Series C Preferred
Stock is not converted into Common Stock.
(c) In addition, the Buyer shall issue 35,500 Series D Preferred shares
(the "Series D Shares") to certain brokers, finders and insiders (the "Brokers")
and in accordance with the terms of certain consulting agreements executed
simultaneously herewith.
(d) All the Series C Preferred shares shall be issued as of the Closing
Date and distributed in the proportion and in accordance with Schedule 3.01(d).
(e) All the Series D Preferred shares shall be issued as of the Closing
Date and distributed in the proportion and in accordance with the list provided
by the Brokers.
Section 3.02. Terms of Preferred Stock. The terms, rights and preferences
of the Series C Preferred and Series D Preferred (collectively the "Preferred
Stock") shall be as set forth in the respective Certificate of Designation.
Section 3.03. Conversion.
(a) Each share of Series C and Series D Preferred Stock shall be
automatically converted (the "Automatic Conversion") into 150 shares of
Frontline's common stock (the "Conversion Shares") immediately upon approval by
Frontline's shareholders of all the following (the "Approval"): (i) the issuance
of shares of Common Stock upon the conversion of the Series C Preferred Stock;
(ii) the "change in control" contemplated by this Agreement and the Transaction
Documents; (iii) an increase in Frontline's authorized common stock to seventy
five million (75,000,000) shares; and (iv) a reverse split of all of the issued
and outstanding shares of common stock of Buyer, at a ratio of 1.5 to 1 (the
"Reverse Split"), or such other ratio as may be required to achieve the
post-conversion ownership percentages set forth in Exhibit A. The Preferred
Stock shall be subject to the Reverse Split. However, it is the parties
intention that that Sellers receive the share consideration and post-conversion
ownership percentages set forth in Exhibit A.
(b) Upon obtaining the Requisite Approvals and the filing of an
amendment to Frontline's Certificate of Incorporation, Buyer shall immediately
issue and deliver to Sellers and the
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Brokers, stock certificates representing the Conversion Shares. The Conversion
Shares shall be fully paid, non-assessable and free of any and all of
Encumbrances. Buyer shall distribute the Conversion Shares in the proportion and
in accordance with the list provided by Arrangoiz and Requejo.
Section 3.04. Consequences of Conversion. On the Conversion Date, the
following transactions shall have been effected:
(a) If the Approval is obtained on or before the Conversion Date, Frontline
shall immediately notify Sellers in writing to such effect and deliver the stock
certificates representing the Conversion Shares, pursuant to Section 3.03(b).
Upon receipt of the Conversion Shares, the Sellers shall return to Frontline the
following documents: (i) the stock certificates representing the Series C
Preferred Shares; (ii) the Note duly cancelled; (iii) the Security Agreement;
and (iv) all other documents and instruments incidental to the Debt, including
any collateral held by Sellers.
(b) If the Approval is not obtained by the Conversion Date, Frontline shall
immediately notify Sellers in writing to that effect.
Section 3.05. Registration Rights. The Buyer shall xxxxx Xxxxxxx
registration rights with respect to the Conversion Shares in the terms and
subject to the conditions of the Registration Rights Agreement.
ARTICLE IV
CONDITIONS TO CLOSING
Section 4.01. Conditions to Closing. The obligations of the parties to
consummate the transactions contemplated by this Agreement in connection with
the Closing are subject to the satisfaction of the following conditions:
(a) The representations and warranties of each of the parties set
forth in this Agreement shall be true and correct in all material respects when
made and shall be deemed to have been made again at, and as of, the Closing
Date, and each of the parties shall have performed and satisfied all obligations
and conditions herein required to be performed or satisfied by each of them on
or prior to the Closing.
(b) Intentionally left blank.
(c) No action, suit or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local or foreign jurisdiction which has the likelihood of resulting in an
unfavorable injunction, judgment, order, decree, ruling or charge that would (i)
prevent consummation of any of the material transactions contemplated by this
Agreement, or (ii) cause any of the material transactions contemplated by this
Agreement to be rescinded following consummation.
(d) Frontline will have received a fairness opinion from a third party
evaluation or investment banking firm that states the transactions contemplated
by this Agreement are financially fair to the shareholders of Frontline.
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(e) Frontline shall have appointed Arrangoiz, Requejo, and an
independent director of Sellers' choosing to its Board of Directors, which shall
be comprised of seven (7) total members.
(f) Frontline shall have received approval of this Agreement and the
transactions contemplated hereby from a majority of its Board of Directors.
(g) Each of the parties shall have completed all regulatory filings
necessary for it to consummate the transactions contemplated by the terms of
this Agreement, except for those filings permitted to be effected prior to the
Conversion Date.
(h) Frontline shall have arranged for a debt financing (the "Bridge
Loan"), in a principal amount of no less than five hundred thousand Dollars
($500,000), which shall close simultaneously with the Closing. The terms and
conditions of the Bridge Loan shall be previously approved by Provo and Sellers.
The use of proceeds of the Bridge Loan shall be as set forth in Exhibit B.
Each of the parties hereto may waive any conditions specified in this Section
4.01, provided that the party so waiving any such condition shall execute a
written waiver thereof at or prior to the Closing.
ARTICLE V
REGULATORY FILINGS
Section 5.01. Regulatory Filings. Prior to the Conversion Date, Frontline
shall properly prepare and file with the Commission all documents required
pursuant to the Exchange Act, in accordance with the execution, delivery and
performance of this Agreement including, without limitation, any and all proxy
materials deemed to be required to (i) complete the transactions contemplated by
this Agreement; (ii) obtain the Approval; and (iii) any reports that may be
required to be filed utilizing Form 8-K, as promulgated by the Commission (the
"Filings").
Section 5.02. Frontline shall prepare and file with the American Stock
Exchange (the "Exchange") all the documents required by the rules of the
Exchange including, but not limited to, any proxy filings and reports on Form
8-K.
Section 5.03. In addition to the Filings and any filings that may be
required by the Exchange, the parties will cooperate with each other in order to
make, as soon as appropriate, all governmental and regulatory filings necessary
in connection with the execution, delivery and performance of this Agreement and
any of the transactions contemplated hereby.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01. The parties represent and warrant to each of the other
parties herein that:
(a) Each party is a corporation duly organized and validly existing
under the laws of their respective jurisdictions and has the corporate power to
own its assets and to carry on
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its business as now conducted. Each party currently holds all governmental and
administrative consents, permits, appointments, approvals, licenses,
certificates and franchises which are necessary for the operation of its
business, all of which are in full force and effect. No material litigation,
other than litigation in the ordinary course of business, or proceeding is
pending or threatened against the party except those matters, if any, described
by the parties in Schedule 6.01(a) attached and incorporated by reference
hereto. Neither the execution or delivery by any Party of this Agreement will
give rise to a material breach of any other agreement to which it is a party, or
interfere with or otherwise adversely affect the ability of the Party to carry
on its business after the Closing.
(b) The Board of Directors of Frontline have approved this Agreement
and the transactions contemplated hereby and have authorized their officers to
execute this Agreement on behalf of Frontline.
(c) Except as disclosed in Schedule 6.01(c), the execution, delivery
and performance of this Agreement and the consummation of all transactions
contemplated hereby or thereby will not conflict with, or result in any
violation of, any provision of any of the party's corporate documents, including
its Articles of Incorporation, Estatutos Sociales, or any law, statute, rule or
regulation to which a party is subject.
(d) No party is currently in bankruptcy or contemplating bankruptcy,
in receivership or has made the assignment of any assets in satisfaction of
outstanding debts to creditors.
(e) Immediately prior to or at the time of Conversion Date, each of
the party's outstanding and issued capital stock shall be the number of shares
described in Exhibit "A" attached hereto and incorporated by reference herein.
As reflected in Exhibit "A," Frontline shall authorize, as part of its proxy,
the reverse split of its shares, and, to the extent possible, canceled warrants
and options and done all such other things necessary so that the maximum amount
of shares held by the shareholders of Frontline at the time of Closing shall be
no more than twenty five percent (25%) of the outstanding and issued shares of
Frontline. Other than that which is disclosed in Exhibit "A," no party is
subject to any options, warrants, stock-based or stock-related awards,
conversion privileges or other rights to acquire any shares of capital stock of
or other ownership interest in such party. Frontline is not subject to any
obligation, contingent or otherwise, to repurchase or otherwise acquire or
retire any shares of its capital stock other than that which is disclosed in
Exhibit "A."
(f) All shares to be issued by Frontline to Arrangoiz and Requejo as a
result of the transactions contemplated by this Agreement (i) will be duly
issued, fully paid, non-assessable and have all the rights, privileges and
immunity described in Frontline's Certificate of Incorporation, and (ii) will be
free and clear of any Encumbrances, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands other than the transfer
restrictions required by law or purchase rights inherent to said securities.
(g) The shares sold to Frontline by Arrangoiz and Requejo are all of
the existing and outstanding capital stock of Provo and no other outstanding and
issued shares exist, and there are no restrictions on their transfer,
Encumbrances, options, warrants, purchase rights, contracts, commitments,
equities, claims and/or demands regarding such capital stock of Provo to be sold
to Frontline.
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(h) Prior to the Closing Date, each of the parties will have exchanged
with the other copies of its financial statements (balance sheet, statement of
operations and statement of changes in stockholder's equity) for the prior three
(3) fiscal years and including any stub period to October 31, 2002. Prior to the
Conversion Date, the parties shall have completed their fiscal year end audit.
Such financial statements shall be presented in accordance with U.S. GAAP, or if
originally prepared under rules other than U.S. GAAP, reconciled to U.S. GAAP.
Except as set forth in Schedule 6.01(l), there has been no material change in
any party's financial condition as of the Closing Date.
(i) Each party hereby agrees that it will maintain and continue to
maintain a system of accounting established and administered in accordance with
U.S. GAAP, that all books and records are and will be in all material respects
true and complete, and maintained in accordance with good business practices and
all applicable laws, and accurately represent and reflect in all material
respects all of the transactions that are or should be therein described.
Further, each party states, except as set forth in Schedule 6.01(m), as of the
Closing, that it has no liabilities or obligations, contingent or otherwise,
which would have a Material Adverse Effect on its condition, financial or
otherwise, as disclosed in the above-described financial statements other than
liabilities incurred subsequent to October 31, 2002, in the ordinary course of
business consistent with past business practices and not resulting from any
breach of agreement, breach of warranty, tort, infringement or violation of law
or regulatory order. For the purposes of this Agreement, the term "Material
Adverse Effect" shall mean liabilities of One Hundred Thousand Dollars ($100,000
U.S.) in the aggregate. The financial statements of the parties as of October
31, 2002 will be attached hereto as Exhibit "B" upon the Closing Date and each
is incorporated by reference herein.
(j) Exhibit C sets forth a true and complete list of all direct or
indirect subsidiaries of Provo that are material to its financial condition,
together with the jurisdiction of incorporation of each such subsidiary and the
percentage of each such subsidiary's outstanding capital stock owned by Provo.
Each such subsidiary is a duly organized corporation, validly existing and in
good standing under the laws of the jurisdiction of its respective incorporation
(as well as all applicable foreign jurisdictions necessary to its business
operations) and has the requisite authority to own, operate or lease the
properties that each purports to own, operate or lease and to carry on its
business as it is now being conducted.
(k) Provo shall take all necessary action so that as of the Closing
Date, Provo shall own beneficially and of record all of the issued and
outstanding capital stock and other securities of each of its subsidiaries.
Notwithstanding the above, it is understood by the parties that Provo is
currently negotiating with shareholders who hold a minority ownership in two of
the Provo subsidiaries as described in Exhibit "C" and that such subsidiaries
account for less than fifteen percent (15%) of the combined revenues of Provo
and its subsidiaries. Provo will continue its negotiations to acquire the
aforementioned shares; however, in the event Provo is unable to purchase the
aforementioned subsidiary shares from the shareholders, then such failure shall
not be a breach of this Agreement and the Closing shall not be affected thereby.
(l) Except as described in Schedule 6.01(p), attached hereto, as of
the Closing Date there is no investment banker, broker, finder or other
intermediary that has been retained or authorized to act on behalf of any of the
parties who might be entitled to any fee or commission from the parties upon the
Closing of this Agreement.
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(m) Each of the Sellers is acquiring the shares of Frontline for their
own account, not as a nominee or agent, for investment and not with a view to,
or for sale in connection with, any distribution thereof in violation of the
Securities Act. None of the Sellers has any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to any
Person or to share or grant any rights with respect to the shares of Frontline.
Sellers understand that the shares of Frontline to be issued them hereunder will
contain a legend and that such shares are restricted securities and may not be
transferred or sold without registration or an exemption therefrom.
(n) Except as disclosed in Schedule 6.01(n), attached hereto, prior to
the Closing Date, each of the parties will use their commercially reasonable
efforts to keep their current business intact, including its present operations,
physical facilities, working conditions and relationships with customers,
lessors, licensors, suppliers, and distributors, and each hereby agrees to give
the other parties notice in the event that any material relationship with a
customer shall be canceled, terminated or expire whereby such party would
experience a material impact upon its revenues.
(o) Except as disclosed in Schedule 6.01(o), attached hereto, each of
the parties material contracts is in full force and effect, there has been no
threatened cancellation thereof, there are no ongoing negotiations to extend the
sum thereof or renew any pending termination, expiration or cancellation
thereof, and there are no outstanding disputes thereunder.
(p) Except as disclosed in Schedule 6.01(p), attached hereto, each of
the parties and their respective subsidiaries has filed all tax returns that it
was required to file under applicable laws and regulations. All such tax returns
were correct and complete in all material respects and have been prepared in
substantial compliance with all applicable laws and regulations. All taxes due
and owing by each of the parties and their subsidiaries have been paid.
(q) True and correct lists of the customers of Provo and each of the
subsidiaries and an aging report of their accounts receivable as of October 31,
2002 are attached hereto as Schedule 6.01(u). Provo agrees to continue to
collect its accounts receivable in the ordinary course of its business and in
the manner customary in Mexico.
ARTICLE VII
COVENANTS OF THE PARTIES
Section 7.01. From the date hereof and to the Closing Date, the parties
will permit representatives of the other parties to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the party, to all premises, properties, appropriate
personnel, books, records (including tax records), contracts and documents of or
pertaining to their business, as well as make available its Directors, officers,
employees, accountants, attorneys and other agents and representatives.
Section 7.02. From the date hereof and to the Closing Date, and except as
may be approved in advance by the other parties or as specifically contemplated
by this Agreement, each party shall refrain from: (i) issuing any shares of
capital stock or other securities, other than pursuant to the
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exercise of existing stock options or warrants; (ii) granting any stock options,
warrants or other rights to acquire capital stock or other securities, other
than pursuant to existing employee stock option plans and consistent with past
practices; (iii) entering into, amending or voluntarily terminating any
employment agreement with any new or existing employee, except for cause; (iv)
granting any increases in the compensation, bonuses, benefits or other
remuneration payable to any employee or consultant; (v) entering into, amending
or voluntarily terminating any license, royalty or distribution agreement; and
(vi) entering into, amending or voluntarily terminating any lease or rental
agreement.
Section 7.03. Each of the parties shall use its best efforts to cause all
conditions precedent to his or its obligations (and to the obligations of the
other party hereto) to consummate the transactions contemplated herein) to be
satisfied, including, but not limited to, using all reasonable efforts to obtain
all required consents, waivers, amendments, modifications, approvals,
authorizations, novations and licenses; provided, however, that nothing herein
contained shall be deemed to modify any of the absolute obligations imposed upon
any of the parties hereto under this Agreement or any agreement executed and
delivered pursuant hereto.
Section 7.04. The parties hereby agree to cooperate and make further
assurances to each other as follows:
(a) Each of the parties hereto shall cooperate with the other parties
hereto in preparing and filing any notices, applications, reports and other
instruments and documents that are required by, or which are desirable in the
reasonable opinion of any of the parties hereto, or their respective legal
counsel, in respect of, any statute, rule, regulation or order of any
governmental or administrative body in connection with the transactions
contemplated by this Agreement.
(b) Each of the parties hereto hereby further agrees to execute,
acknowledge, deliver, file and/or record or cause such other parties to the
extent permitted by law to execute, acknowledge, deliver, file and/or record
such other documents as may be required by this Agreement or by their respective
legal counsel in order to document and carry out the transactions contemplated
by this Agreement.
Section 7.05. Each party hereto agrees that prior to the Closing Date he or
it will enter into no transaction and take no action, and will use his or its
best efforts to prevent the occurrence of any event (but excluding events which
occur in the ordinary course of business and events over which each party has no
control), which will result in any of his or its representations, warranties or
covenants contained in this Agreement, or in any agreement, document or
instrument executed and delivered by him or it pursuant hereto not to be true
and correct, or not to be performed as contemplated, at and as of the time
immediately after the occurrence of such transaction or event.
Section 7.06. The parties hereby agree to and shall give prompt notice to
the other parties as the case may be, of (i) the occurrence, or non-occurrence,
of any event the occurrence or non-occurrence of which would be likely to cause
any representation contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing Date and (ii) any material failure
of any of the parties to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under the terms of this
Agreement; provided, however, that the
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delivery of any notice pursuant to this Section 7.06 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
Section 7.07. Provo hereby covenants and agrees that during the period from
the date hereof to the Closing Date except pursuant to the terms hereof or
unless Frontline shall otherwise agree, in writing, that its business shall be
conducted only in the ordinary course of business and in the manner consistent
with past practice and in compliance with applicable laws; it shall use its best
efforts to preserve intact their assets, their business operations and their
business organization, to keep available the services of the present officers,
employees and consultants, and to preserve its present relationships with
customers, suppliers and other persons with whom it has a business relationship.
By way of illustration, and not limitation, Provo shall not, between the date of
this Agreement and the Closing Date, unless specifically contemplated by this
Agreement, directly or indirectly, do or propose or commit to do, any of the
following without the prior written consent of Frontline:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of their common stock, or (ii) split, combine
or reclassify any of their capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for their
existing shares of capital stock, or otherwise;
(b) authorize for issuance, issue, deliver, sell or agree to commit to
issue, sell or deliver, (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise), pledge
or otherwise encumber, any shares of their capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, convertible securities
or any other securities or equity equivalents;
(c) (i) increase the compensation payable or to become payable to any
officer, director, employee or consultant, except pursuant to the terms of
existing contracts, policies or benefit arrangements in effect on the date
hereof, or (ii) grant any severance or termination paid to, or enter into any
employment or severance agreement with, any director, officer, other employee or
consultant except pursuant to the terms of existing contracts, policies and
benefit arrangements in effect on the execution date hereof, or (iii) establish,
adopt enter into or amend any collective bargaining (other than in accordance
with past practice), bonus, profit sharing, thrift, compensation, stock option,
or restrictive stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers, employees or
consultants; (iv) amend their Articles of Incorporation, Articles of
Organization or any other documents related to their organization and
capitalization including By-laws or other comparable charter or organizational
documents or through merger, liquidation, reorganization, restructuring, or in
any other fashion, alter their corporate structure or ownership;
(d) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities, guarantee any debt securities of
another person, or enter into any arrangement having an economic effect of any
of the foregoing, except for short-term borrowings incurred in the ordinary
course of business consistent with past practices;
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(e) except as contemplated hereby, acquire, or agree to acquire (i) by
merging or consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or corporation,
partnership, joint venture, association or other business organization or
division thereof, or (ii) any assets that are material, individually or in the
aggregate, except purchases consistent with its ordinary course of business or
past practice in excess of Fifty Thousand Dollars ($50,000);
(f) except as disclosed in Schedule 7.07(f) or in the ordinary course
of business, enter into any agreement, contract, or commitment to purchase,
sell, lease or otherwise dispose of assets or require payments in excess of
Fifty Thousand Dollars ($50,000);
(g) except as disclosed in Schedule 7.07(g), make any capital
expenditures in excess of Fifty Thousand Dollars ($50,000);
(h) extend credit or acquire merchandise, utilize or repay any bank
line of credit other than in the normal course or conduct of business consistent
with past practice;
(i) adopt a plan of complete or partial liquidation or resolutions
providing for authorizing such a liquidation or the dissolution, merger,
consolidation, restructuring, recapitalization or reorganization other than that
which is contemplated by the terms of this Agreement;
(j) make or change any election, change an annual accounting period,
adopt or change any accounting method, file an amended tax return, enter into
any closing agreements, sell any tax claim or assessment, surrender any right to
claim a refund of taxes, consent to an extension of or waiver of the limitation
period applicable to any tax claim or assessment or take any other similar
action related to the filing of any tax return or the payment of any tax, if
such election, adoption, change, amendment, agreement, settlement, surrender,
consent or other action would have the effect of increasing their tax liability
for any period ending after October 31, 2002; and
(k) except as disclosed in Schedule 7.01(j) settle or compromise any
litigation to which they are a defendant (whether or not it commenced prior to
the date of this Agreement) or settle, pay or compromise any claims not required
to be paid, which payments are individually in an amount in excess of Ten
Thousand Dollars ($10,000) and in the aggregate in an amount in excess of Fifty
Thousand Dollars ($50,000).
Section 7.08. Frontline covenants and agrees that, during the period from
the date hereof to the Closing Date, except as required pursuant to the terms
hereof or unless Provo shall otherwise agree, in writing, the Frontline business
shall be conducted only, and Frontline shall not take any action, except in the
ordinary course of business and in a manner consistent with past practice and in
compliance with applicable laws; and Frontline shall use its best efforts to
preserve intact the Frontline assets, the Frontline business operations and the
business organization of Frontline, to keep available the services of its
present officers, employees and consultants, and to preserve the present
relationships of Frontline with its customers, suppliers and other persons with
whom Frontline has a business relationship. By way of illustration, and not
limitation, Frontline shall not, between the date of this Agreement and the
Closing Date, unless specifically contemplated by this
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Agreement, directly or indirectly, do or propose or commit to do, any of the
following without prior written consent of Provo:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of the Frontline capital stock or, (ii) except
for the reverse stock split required by the terms of this Agreement, split,
combine or re-classify any of the Frontline capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of the Frontline capital stock, or otherwise;
(b) except as required under the terms of the currently issued
Preferred Stock, authorize for issuance, issue, deliver, sell or agree to commit
to issue, sell or deliver (whether through issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise), pledge
or otherwise encumber any shares of Frontline capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, convertible securities
or any other securities or equity equivalents;
(c) (i) increase the compensation payable or to become payable to any
officer, director, employee or consultant of Frontline, except pursuant to the
terms of existing contracts, policies or benefit arrangements in effect on the
date hereof, or (ii) grant any severance or termination paid to, or enter into
any employment or severance agreement with, any director, officer or other
employee or consultant of Frontline or any of its subsidiaries, except pursuant
to the terms of existing contracts, policies, and benefit arrangements in effect
on the date hereof, or (iii) establish, adopt, enter into or amend any
collective bargaining (other than in accordance with past practice) bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy, or arrangement for the benefit of any
directors, officers, employees or consultants of Frontline;
(d) amend the Certificate of Incorporation, bylaws or other comparable
charter organization documents of Frontline, except as contemplated hereby;
(e) except as contemplated hereby, acquire, or agree to acquire (i) by
merging or consolidating with, or by purchasing a substantial portion of the
stock or assets of, or by any other manner, any business or corporation,
partnership, joint venture, association or other business organization or
division thereof, or (ii) any assets that are material, individually or in the
aggregate, except purchases consistent with its ordinary course of business or
past practice in excess of Fifty Thousand Dollars ($50,000);
(f) sell, lease, license, mortgage or otherwise encumber or subject to
any lien, security interest, pledge or encumbrance or otherwise dispose of any
of the Frontline assets, except sales in the ordinary course of business
consistent with past practices;
(g) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
the rights to secure any debt securities, guarantee any debt securities of any
other person, or enter into any arrangement having the economic effect of any of
the foregoing, except for the short term borrowings incurred in the ordinary
course of business consistent with past practice;
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(h) except in the ordinary course of business, enter into any
agreement, contract or commitment, involving a commitment on the part of
Frontline to purchase, sell, lease or otherwise dispose of assets or acquire
payment by Frontline in excess of Fifty Thousand Dollars ($50,000);
(i) make any capital expenditures in excess of Twenty-Five Thousand
Dollars ($25,000);
(j) adopt a plan of complete or partial liquidation of Frontline or
resolutions providing for or authorizing such liquidation or the dissolution,
merger, consolidation, restructuring, or recapitalization or reorganization of
Frontline other than that which is contemplated by the terms of this Agreement;
(k) make or change any election, change in annual accounting, adopt or
change any accounting method or principle, file an amended tax return, enter
into any closing agreement, settle any tax claim or assessment relating to
Frontline or any of its subsidiaries, surrender any right to claim a refund of
taxes, consent to any extension of or waiver of the limitation period applicable
to any tax claim or assessment relating to Frontline or its subsidiaries, or
take any other similar action relating to the filing of any tax return or the
payment of any tax, if such election, adoption, change, amendment, agreement,
settlement, surrender, consent or other action would have the effect of
increasing the tax liability of Frontline or any of its subsidiaries for a
period ending after October 31, 2002 or decreasing any tax attribute of
Frontline existing on the Closing Date;
(l) settle or compromise any litigation to which Frontline is a
defendant (whether or not commenced prior to the date of this Agreement) or
settle, pay or compromise any claims not required to be paid, which payments are
individually in an amount in excess of Ten Thousand Dollars ($10,000) and in the
aggregate in an amount in excess of Fifty Thousand Dollars ($50,000); and
(m) extend credit or acquire merchandise, utilize or repay any bank
line of credit other than in the normal course of business consistent with past
practice.
Section 7.09. Each of the parties agree to use their reasonable efforts to
cause the purchase of the Provo Shares to qualify as a tax free transaction in
accordance with Mexican tax law. The parties agree to file all necessary returns
and/or tax information to reflect the purchase of the Provo Shares as a tax free
transaction under Mexican law and agree not to take any position thereon or
otherwise that is or would be inconsistent with such treatment (except if such
position would violate any law of any jurisdiction to which the Party is
subject).
Section 7.10. As soon as it is practicable after the date of this
Agreement, Frontline shall, with the cooperation of Provo, prepare and file with
the SEC all necessary filings and documents required by the consummation of the
transactions contemplated by the terms of this Agreement including, but not
limited to, any Form 8-K. It is further agreed that Frontline shall take the
necessary steps and shall file the necessary documents in order to request that
the holders of Frontline Series B Convertible Redeemable Preferred Stock convert
their Preferred Stock to Frontline common stock and that such duly issued common
stock will be part of and not in addition
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to, the outstanding issued shares allotted to Frontline shareholders upon the
Closing hereof as set forth in Exhibit "A."
Section 7.11. It is understood and agreed that Frontline shall file all
necessary documents in order to request its shareholders to approve an amendment
of its Certificate of Incorporation to effect the Reverse Split.
Section 7.12. Frontline agrees to use its best efforts to, on or prior to
the Conversion Date, cause its preferred shareholders to approve the conversion
of all of the issued and outstanding shares of Series B Convertible Redeemable
Preferred Stock of Buyer, at a ratio of 3.4 shares of preferred stock to 1 share
of common stock (the "Preferred Conversion").
ARTICLE VIII
REQUIREMENTS TO CLOSING
Section 8.01. The respective obligations of Frontline to effect the
purchase of the Provo Shares shall be subject to the fulfillment at or prior to
the Closing Date of the following requirements, any or all of which may be
waived by such party at its sole discretion:
(a) The representations and warranties of Provo contained in this
Agreement and any other document delivered by it in accordance with the terms of
this Agreement shall have been true when made and, in addition, shall be true in
all material respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date.
(b) Each of the parties shall have executed and delivered all of the
Transaction Documents to which they are parties.
(c) Provo shall have performed, observed and complied in all material
respects with all of its obligations, covenants and agreements, and shall have
satisfied or fulfilled in all material respects all conditions contained in any
document referenced herein and required to be performed, observed or complied
with, or to be satisfied or fulfilled by Provo at or prior to the Closing Date.
(d) Intentionally left blank.
(e) Frontline shall have received an opinion from counsel for Provo,
dated as of the Closing Date, that the transactions contemplated herein have
been properly authorized in accordance with the laws of the respective
jurisdictions of Provo and its subsidiaries, and an opinion regarding the
enforceability of the Transaction Documents from Xxxxxxx Berlin Shereff
Xxxxxxxx, LLP.. Such opinions shall be in a form acceptable to counsel for
Frontline.
(f) No order of any court or administrative agency shall be in effect
which constrains or prohibits the transactions contemplated hereby, and no
claim, suit, action, inquiry, investigation or proceeding in which it will be,
or it is, sought to restrain, prohibit, or change the terms of or obtain damages
or other relief in connection with this Agreement or any other transactions
contemplated hereby, shall have been instituted or threatened by any person or
entity, in which in the reasonable judgment of Frontline (based on the
likelihood of success and material
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consequences of such claim, suit, action, inquiry or proceeding) makes it
inadvisable to proceed with the consummation of such transactions.
(g) All consents, waivers, approvals, licenses and authorizations
third parties and governmental and administrative authorities (and all
amendments or modifications to existing agreements with third parties) (the
"Consents") required as a pre-condition to the performance by the parties of
their obligations hereunder and under any agreement delivered pursuant hereto,
or which in Frontline's reasonable judgment are necessary to continue
unimpaired, subject to the Closing Date, any rights in and to the Provo assets,
business or operations which could be impaired by the transactions contemplated
herein, shall have been duly obtained and shall be in full force and effect.
(h) The validity of all transactions contemplated by all of the
Transaction Documents, as well as the form and substance of all agreements,
instruments, opinions, certificates and other documents delivered by Provo
pursuant hereto, shall be satisfactory in all material respects to Frontline and
its counsel.
(i) Except as otherwise provided by this Agreement, there shall not
have occurred after the date hereof a Material Adverse Effect in the condition
of Provo.
(j) The American Stock Exchange ("AMEX") shall have orally advised the
parties that the closing of the transactions contemplated by the Transaction
Documents does not constitute as "change of control" in accordance with AMEX's
rules and regulations.
Section 8.02. The obligations of Provo to effect the purchase of the Provo
Shares by Frontline shall be subject to the fulfillment at or prior to the
Closing Date of the following requirements, any or all of which may be waived by
the parties at their sole discretion:
(a) The representations and warranties of Frontline contained in any
Frontline documents delivered by Frontline shall have been true when made, and
in addition, it shall be true in all material respects on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date.
(b) Frontline shall have performed, observed and complied in all
material respects with all their obligations, covenants and agreements, and
shall have satisfied or fulfilled in all material respects all conditions
contained in any document referenced herein and required to be performed,
observed or complied with, or to be satisfied or fulfilled by Frontline at or
prior to the Closing Date.
(c) Intentionally left blank.
(d) Provo shall have received an opinion from Frontline's counsel,
dated as of the Closing Date, that Frontline is a corporation validly existing
under the laws of the State of Delaware, and that the transactions contemplated
herein have been properly authorized in accordance with the laws of the State of
Delaware and have been accomplished in compliance with the rules and regulations
of the SEC. Such opinion shall be in the form acceptable to Provo's counsel.
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(e) No order of any court or administrative agency shall be in effect
which constrains or prohibits the transactions contemplated hereby, and no
claim, suit, action, inquiry, investigation or proceeding in which it will be,
or it is, sought to restrain, prohibit, or change the terms of or obtain damages
or other relief in connection with this Agreement or any other transactions
contemplated hereby, shall have been instituted or threatened by any person or
entity, in which in the reasonable judgment of Provo (based on the likelihood of
success and material consequences of such claim, action, inquiry, investigation
or proceeding) makes it inadvisable to proceed with the consummation of such
transactions.
(f) The validity of all transactions contemplated by the Transaction
Documents, as well as the form and substance of all agreements, instruments,
opinions, certificates and other documents delivered by Frontline pursuant
hereto, shall be satisfactorily in all material respects to Provo's counsel.
(g) AMEX shall have orally advised the parties that the closing of the
transactions contemplated by the Transaction Documents does not constitute as
"change of control" in accordance with AMEX's rules and regulations.
(h) Except as otherwise permitted by this Agreement, there shall not
have occurred after the date hereof any Material Adverse Effect in the condition
of Frontline.
(i) Frontline shall have received the proceeds of the Bridge Loan.
Section 8.03. Deliveries by Arrangoiz and Xxxxxxx at Closing. Arrangoiz and
Xxxxxxx shall deliver the following:
(a) Frontline shall receive the stock certificates representing all of
the issued and outstanding capital stock of Provo with proper instruments of
transfer, transferring the ownership of the Provo Shares to Frontline;
(b) Frontline shall receive duly executed copies of all Transaction
Documents to which Provo, Arrangoiz and Xxxxxxx are a party;
(c) Frontline shall receive a certificate executed by Xxxxxxx and
Arrangoiz dated as of the Closing Date to the effect that all representations
and warranties of Xxxxxxx and Xxxxxxxxx and Provo are true and complete in all
material respects and all covenants to be performed by them or Provo at or as of
the Closing have been performed in all material respects and conditions to be
satisfied at or as of the Closing have been satisfied in all material respects
or waived in accordance with the terms of this Agreement.
Section 8.04. Deliveries by Frontline at the Closing. At the Closing,
Frontline shall deliver the following:
(a) Sellers shall receive stock certificates representing the Series C
Preferred shares to be issued to Arrangoiz and Xxxxxxx in accordance with the
terms of this Agreement;
(b) The Brokers shall receive stock certificates representing the
Series D Preferred Shares to be issued to the Brokers;
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(c) Sellers shall receive duly executed copies of the Note, the
Security Agreement and all other documents incidental to the Debt;
(d) Provo and Sellers shall receive duly executed copies of all
Transaction Documents to which Frontline is a party;
(e) Provo and Sellers shall receive a Secretary's certificate
certifying copies of (i) the resolutions adopted by the Frontline Board of
Directors authorizing Frontline and its officers to execute and deliver the
Frontline documents to which it is a party, to perform its obligations hereunder
and to complete the issuance of shares to Provo as contemplated herein, and (ii)
the resolution appointing Arrangoiz, Requejo, and one independent director of
Seller's choosing to the Board of Directors of Frontline;
(f) Provo shall receive a certificate of the Secretary of Frontline
certifying as to the incumbency and signatures of the officers of Frontline
executing the Frontline documents on behalf of such corporation;
(g) Frontline shall have furnished Provo with a certificate executed
by its President, dated as of the Closing Date, to the effect that all
representation and warranties of Frontline and true and complete in all material
respects and all covenants to be performed by Frontline at or as of the Closing
have been performed in all material respects and the conditions to be satisfied
at or as of the Closing have been satisfied in all material respects or waived
in accordance with terms of this Agreement.
ARTICLE IX
INDEMNIFICATION
Section 9.01. Subject to the provisions of this Article IX, each party
(each an "Indemnifying Party") shall indemnify and save harmless each of the
other parties and their respective officers, directors, employees, agents and
successors and assigns, and each person who controls each of the parties within
the meaning of the Securities Act or the Exchange Act, from and against any and
all Liabilities, losses, damages, claims (whether or not meritorious),
judgments, fines, settlements and other costs and expenses (including reasonable
attorneys' fees and expenses) based upon, arising out of or resulting from any
breach of any representation or warranty, or any breach of or failure to perform
any covenant or agreement, by such Indemnifying party set forth in this
Agreement or any of the other Transaction Documents or any Litigation brought by
any third party arising out of the transactions contemplated hereby and thereby.
The indemnification provisions of this Article IX shall survive for two (2)
years from the Closing Date.
Section 9.02. The party seeking indemnification under this Article IX (the
"Indemnified Party") shall, promptly after the receipt of notice of the
commencement of any Litigation against such Indemnified Party in respect of
which indemnity may be sought under this Article IX, notify the Indemnifying
Party in writing of the commencement thereof (the "Indemnification Notice"). The
failure of any Indemnified Party to give the Indemnifying Party an
Indemnification Notice shall not relieve the Indemnifying Party from any
Liability which it may have to such Indemnified Party under this Article IX
except to the extent that such Indemnifying Party shall have been prejudiced
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thereby. In case any such Litigation shall be brought against any Indemnified
Party, the Indemnifying Party shall be entitled to participate therein, and to
the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnifying Party by giving written notice of
the Indemnifying Party's election to assume the defense within thirty (30) days
after its receipt of the Indemnification Notice, and after timely written notice
from the Indemnifying Party to such Indemnified Party of its election so to
assume the defense thereof, such Indemnifying Party will not be liable to such
Indemnified Party under this Article IX for any legal expense subsequently
incurred by such Indemnified Party in connection with the defense thereof nor
for any settlement thereof entered into by the Indemnified Party without the
consent of the corresponding Indemnifying Party; provided that (i) if an
Indemnifying Party shall elect not to assume (or shall fail within the time
period set forth above to elect to assume) the defense of such Litigation, or
shall subsequently fail to diligently maintain the defense thereof, or (ii) if
counsel for the Indemnified Party reasonably determines (x) that there may be a
conflict between the positions of Indemnifying and of the Indemnifying and of
the Indemnified Party in defending such Litigation or (y) that there may be
legal defenses available to such Indemnifying Party different from or in
addition to those available to such Indemnifying Party, then separate counsel
for the Indemnified Party shall be entitled to participate in and conduct the
defense, in the case of clauses (i) and (ii) (x), or such different defenses, in
the case of clause (ii) (y), and such Indemnifying Party in connection
therewith, and, in the case of clause (i), for any settlement of such Litigation
entered into by the Indemnified Party. The corresponding Indemnifying Party
shall not enter into any settlement of any such Litigation without the consent
of the Indemnified Party, which consent shall not be unreasonably withheld or
delayed.
Section 9.03. Other than representations and warranties made by the parties
in Section 6.01 hereof, each of the parties disclaim any other warranties,
expressed or implied, written or oral, related to their business, including but
not limited to, warranties or merchantability or fitness for any particular
purpose.
Section 9.04. An Indemnifying Party shall not be obligated to indemnify an
Indemnified Party under this Article IX unless and until all losses with respect
to which the Indemnifying Party has indemnification obligations hereunder exceed
One Hundred Thousand Dollars ($100,000) in the aggregate, following which the
Indemnifying Party shall be obligated to indemnity or hold harmless the
Indemnified Party for all such losses in excess of such amount. In no event
shall the indemnification obligations of each of the parties hereunder exceed
Five Hundred Thousand Dollars ($500,000) in the aggregate.
Section 9.05. The representations and warranties of Provo contained in this
Agreement shall survive until the date that is two years after the Closing Date.
The obligation of an Indemnifying Party to hold harmless an Indemnified Party
shall be extended automatically to include any time necessary to resolve a claim
for indemnification that was made in accordance with the terms hereof before the
expiration of the survival period, but not resolved prior to its expiration and
any such extension shall apply as to the specific claims asserted and not
resolved within the survival period. The liability associated with any such item
shall continue until such claim shall have been finally settled, decided or
adjudicated.
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ARTICLE X
DEFAULT
Section 10.01. Default. The following are "Events of Default" under this
Agreement:
(h) a party shall duly fail to observe any other covenant, condition
or agreement of this Agreement, which failure shall continue for thirty (30)
days after written notice thereof is received from any of the other parties.
(i) any warranty or representation made in this Agreement shall be
breached by a party or shall prove to be false or misleading in any material
respect at any time prior to or following the Closing.
(j) if a party is or becomes the subject of a bankruptcy,
reorganization, rearrangement, or voluntary insolvency proceeding under
applicable bankruptcy, insolvency, creditor's rights or similar laws in effect
in the jurisdiction of the party's organization or any other jurisdiction in
which a party may seek or be subject to any such protection or proceedings, or
in voluntary proceeding, if such proceeding is not dismissed within sixty (60)
days.
(k) if a party shall seek, consent to or acquiesce in the appointment
of any trustee, receiver or liquidator of, or if a trustee, receiver or
liquidator is otherwise appointed for it, or all or any material part of its
assets.
(l) if a party shall make any general assignment for the benefit of
creditors.
(m) in any proceeding a party shall be alleged to be insolvent or
unable generally to pay its debts as they become due if such proceeding is not
dismissed within sixty (60) days.
(n) a party commences any one or more of the processes of dissolution,
termination or liquidation.
Notwithstanding the above provisions, any cure periods provided for in this
Section shall not apply with respect to any Event of Default of the same type or
nature which is repeated more than twice in any twelve month period. This
section shall continue in full force and effect until the Conversion Date, at
which time the default provisions set forth in this section shall cease.
Section 10.02. The remedies identified in this Agreement shall be
cumulative and not exclusive and the parties shall be entitled to all other
remedies available under law or in equity.
Section 10.03. The parties shall be entitled to enforce their rights under
this Agreement specifically and to recover damages by reason of any Event of
Default or any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree not to oppose any
final judgments of specific performance. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party in its sole discretion may
apply to any court of law or in equity of competent jurisdiction for specific
performance or injunctive relief (without posting
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a bond or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
ARTICLE XI
FURTHER ASSURANCES
Section 11.01. Further Assurances. The parties agree that all transactions
hereunder shall be done in the most efficient tax manner for Arrangoiz, Xxxxxxx
and Provo, in order to minimize taxes for both parties in Mexico and the United
States. To that end, following the Closing and subject to the opinion of tax
advisors in Mexico and the United States, each of the parties hereto and their
respective Affiliates, agree to use their best efforts to take, execute,
acknowledge and deliver all such further acts, documents and assurances as are
reasonably necessary, from time to time, in order to carry out more effectively
the intent and purposes hereof and the other Transaction Documents.
ARTICLE XII
TERMINATION
Section 12.01 Termination. This Agreement and the other transactions
contemplated hereby may be terminated at any time prior to the Closing:
(a) by mutual written agreement of the Parties;
(b) by any party if the Closing shall have not been consummated by
April 5, 2003; provided, however, that no party may terminate this Agreement
pursuant to this clause (b) if the Closing shall not have been consummated by
April 5, 2003 by reason (i) of the failure of such party or any of its
affiliates to perform in all material respects any of its or their respective
covenants or agreements contained in this Agreement; or (ii) actions of a third
party regulatory agency, in which case the aforementioned date shall be extended
for a period of time equal to the delay caused by the regulatory agency.
(c) by either party if there shall be any applicable law that makes
consummation of the transactions contemplated hereby illegal or otherwise
prohibited or if consummation of the transactions contemplated hereby would
violate any non-appealable final order, decree or judgment of any governmental
authority having competent jurisdiction over such person.
Any party desiring to terminate this Agreement pursuant to this Section
12.01 shall give written notice of such termination to the other parties.
Section 12.02 Effect of Termination.
(a) If this Agreement is terminated as permitted by Section 12.01, (i)
this Agreement shall forthwith become void and of no further force and effect,
except for the following provisions, which shall remain in full force and
effect: (a) Section 13.02 (relating to confidentiality), (b) Section 13.09
(relating to expenses), (c) this Section 12.02 and (d) Sections 13.06 and 13.08;
and (ii) such termination shall be without liability of any party (or any
affiliate, stockholder,
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consultant or representative of such party) to the other parties to this
Agreement; provided, however, that if the transactions contemplated hereby fail
to close as a result of a breach of the provisions of this Agreement by any of
the parties, such party shall be fully liable for any and all damages or losses
incurred or suffered by the other parties as a result of all such breaches if
the other party(ies) is/are ready, willing and able to otherwise satisfy its
obligations under this Agreement.
(b) The rights and remedies provided in this Section 12.02 shall be
cumulative and not exclusive of any rights or remedies provided by applicable
law.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Miscellaneous. This Agreement shall be binding upon and
inure to the benefit of the parties named in this Agreement and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of its rights, interests or obligations hereunder or under any other
Transaction Documents without the prior written approval of each of the other
parties.
Section 13.02. Except as otherwise required by law, including, without
limitation, Frontline's reporting obligations under the Exchange Act, no public
disclosure of the terms of the Contemplated Transactions shall be made by either
party without the prior written consent of the other parties, which will not be
unreasonably withheld or delayed. Each party shall furnish to the other parties
advance copies of any releases which it proposes to make concerning the
transaction.
Section 13.03. All information obtained by the parties from each other will
be treated as confidential and the parties agree not to disclose, disseminate,
reveal, share, or release all or any portion of such information to third
parties, including their respective parent, subsidiaries, or affiliates, without
the express written consent of the party providing the information.
Section 13.04. Any holding that a provision of this Agreement is
unenforceable, in whole or in party, will not affect the validity of the other
provisions of this Agreement.
Section 13.05. This Agreement (including the exhibits, schedules and
appendices attached hereto), including the documents referred to herein,
embodies the entire agreement and understanding of the parties hereto and
supersedes all prior agreements and understandings of the parties hereto
relating to the subject matter herein contained, including, without limitation,
that certain Stock Purchase and Acquisition Agreement, dated as of December 20,
2002, by and among, Frontline, Provo, Sellers and Kiboga Systems, Inc.
Section 13.06. This Agreement shall be construed, interpreted, governed,
and enforced by and under the laws of the State of New York, without giving
effect to the conflicts of law principles thereof.
Section 13.07. All notices under this Agreement, including reports, shall
be in writing in the English language addressed to the appropriate party at the
address set forth by its name on this Agreement, and shall be deemed given when
received by the recipient and shall be delivered
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directly by hand to authorized personnel or by registered mail, return receipt
requested, telex authenticated facsimile message or electronic mail, confirmed
by registered mail.
All notices shall be addressed:
If to Provo, Arrangoiz, Xxxxxxx: Provo, S.A. de X.X.
Xxxxxxxx Xxx Xx. 00
Xxx. Xxxx Xxx
00000 Xxxxxx, D.F.
Fax: 000-000-0000
Attention: Xxxxxxx Xxxxxxxx del Rio Arrangoiz
With a copy, which shall not constitute notice, to:
Xxxxxxx Berlin Sheriff Xxxxxxxx, LLP
The Washington Harbour
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxx X. Pin
If to Frontline: Frontline Communications Corp.
Xxx Xxxx Xxxx Xxxxx, 0xx Xxxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxx-Xxxxxxxx
With a copy to:
Xxx Xxxxxx-Xxxx
Xxx Xxxx Xxxx Xxxxx, 0xx Xxxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Section 13.08. All controversies relating to the interpretation and/or
enforcement of this Agreement and the transactions contemplated herein shall be
settled by binding arbitration in accordance with the International Rules of
Arbitration of the American Arbitration Association in effect on the date the
notice for arbitration is given to the other party or parties. In the event of
any conflict between those rules and the provisions of this Section 13.08, the
provisions of this Section 13.08 shall govern. The parties shall attempt to
select a single arbitrator, but if they are unable to agree within ten (10) days
from the date of an arbitration demand served by any of the parties, then each
of the parties shall appoint one arbitrator and the arbitrators so chosen shall
in turn choose an additional arbitrator. If the arbitrators chosen by the
parties cannot agree on the choice of the final arbitrator within a period of
ten (10) days after their nomination, then the final arbitrator shall be
appointed by the American Arbitration Association. Any arbitration proceedings
initiated hereunder shall be held in New York, New York, or such other place as
the parties may mutually agree. The arbitration shall take place in the English
language. No decision of the arbitrator(s) shall be subject to appeal, and
judgment on the award or decision rendered by the arbitrator(s) may be entered
in any court having jurisdiction thereof. To assure predictability, any
arbitrators chosen by the parties or otherwise pursuant to this section shall be
attorneys-in-law with experience in sophisticated commercial transactions. The
arbitrator(s) shall base the decision solely
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on the provisions of this Agreement; provided, however, that to the extent the
subject matter for the decision is not provided for in such provisions, the
decision shall be based on applicable principles of law and judicial precedent
as established in the law of the jurisdiction provided under Section 13.06 and,
upon request of a party, will include in the award findings of facts and
conclusions of law upon which the award is based. The arbitrator(s) may grant
such legal or equitable relief as appropriate, including money damages, specific
performance and injunctive relief. Questions of whether the dispute is subject
to arbitration shall also be decided by the arbitrator(s). The final arbitration
award shall be issued within ninety (90) days after the arbitration is
initiated. Subject to the award of the arbitrator(s), each party to the
arbitration shall pay an equal share of the fees and costs of the arbitration,
except the arbitrator(s) shall have the power to award all expenses (including
attorneys' fees and costs) to the prevailing party, as determined by the
arbitrator(s). Each of the parties waives any defense of inconvenient forum to
the maintenance of an action or proceeding brought under this Section 13.08 and
waives any bond, surety, or other security that might be required of any other
party with respect thereto. Any party may make service on any other party by
sending or delivering a copy of the process to the party to be served at the
address and in the manner provided for the giving of notices in Section 13.07
above. Nothing in this Section 13.08, however, shall affect the right of any
party to serve legal process in any other manner permitted by law. Each party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
Section 13.09. Each of the parties shall bear and shall pay their
respective costs and expenses (including reasonable legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
Section 13.10. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement.
Section 13.11. This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which,
when executed and delivered, shall be effective for purposes of binding the
parties hereto, but all of which shall together constitute one and the same
instrument. Any signature page delivered by a fax machine or telecopy machine
shall be binding to the same extent as an original signature page, with regard
to any of the transaction documents or any amendment thereto. Any party who
delivers such a signature page agrees to later deliver an original counterpart
to any party which requests it.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, and for the consideration herein stated, the parties
have executed this Agreement the day and year first above written.
/s/ Xxxxxxx Xxxxxxxx del Rio Arrangoiz
--------------------------------------
Proyecciones y Ventas
Organizadas, S.A. de C.V.
By: Xxxxxxx Xxxxxxxx del Rio Arrangoiz
Title: Chairman
/s/ Xxxxxxx Xxxx-Xxxxxxxx /s/ Xxxxxxx Xxxxxxxx del Rio Arrangoiz
----------------------------- ------------------------------------------------
Frontline Communications Xxxxxxx Xxxxxxxx del Rio Arrangoiz, Individually
By: Xxxxxxx Xxxx-Xxxxxxxx
Title: CEO
/s/ Xxxxxxx Xxxxxxxx del Rio Xxxxxxx
----------------------------------------------
Xxxxxxx Xxxxxxxx del Rio Xxxxxxx, Individually
THE FOLLOWING EXHIBITS HAVE BEEN INTENTIONALLY OMITTED:
EXHIBIT A -- Issued and Outstanding
EXHIBIT B -- Fees and Expenses
EXHIBIT C -- Subsidiaries of Provo
6.01(a) -- Material Litigation
6.01(c) -- Non-Contravention
6.01(l) -- Material Changes
6.01(m) -- Undisclosed Liabilities and Obligations
6.01(p) -- Brokers/Finders
6.01(n) -- Customer/Supplier Relationships
6.01(o) -- Material Contracts
6.01(p) -- Tax Returns
7.07(f) -- Material Dispositions of Assets
7.07(g) -- Capital Expenditures
7.07(j) -- Settlement of Litigation
The Registrant will provide copies of the omitted Exhibits to the Securities and
Exchange Commission upon request.
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