Exhibit 10.18
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of December 10, 1999,
is entered into by and between FRONTLINE COMMUNICATIONS CORP., a Delaware
corporation, with headquarters located at Xxx Xxxx Xxxx Xxxxx, 0xx Xxxxx, P. O.
Xxx 0000, Xxxxx Xxxxx, XX 00000 (the "Company"), and the undersigned (the
"Buyer").
Buyer hereby represents and warrants to, and agrees with the Company as follows:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, (THE "1933 ACT"), ARE RESTRICTED SECURITIES (AS DEFINED
IN RULE 144 UNDER THE 1933 ACT) AND MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO REGISTRATION UNDER THE 1933 ACT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT. THE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT TO REGISTRATION OR AN
EXEMPTION THEREFROM. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
WITNESSETH:
WHEREAS, the Company and the Buyer are executing and delivering this Agreement
in reliance upon exemptions from securities registration afforded under
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act") and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Company will issue to Buyer and the Finder (as hereinafter
defined), upon the terms and conditions of this Agreement (i) shares of common
stock, $.01 par value per share (the "Common Stock") of the Company, (ii)
Repricing Rights (as hereinafter defined) to acquire shares of Common Stock (the
"Additional Shares"), and (iii) Warrants to purchase shares of Common Stock (the
"Warrant Shares"). The Common Stock, Repricing Rights, Additional Shares,
Warrants and Warrant Shares are hereinafter referred to collectively, as the
"Securities";
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
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1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase. The undersigned hereby agrees to purchase from the Company
U.S.D.$750,000 of Common Stock of the Company (the "Shares") at a price per
share equal to the average closing bid price of the Common Stock as
reported by Nasdaq for the five (5) trading days immediately preceding the
Closing Date, as hereinafter defined (the "Purchase Price Per Share"),
together with certain Repricing Rights (as defined in Section 5(a) hereof)
for an aggregate purchase price of $750,000 (the "Purchase Price"). In no
event shall the Company issue in the aggregate more than 250,000 shares of
Common Stock, Additional Shares and Warrant Shares under the terms of this
Agreement.
b. Warrant Coverage. The Buyer shall receive warrants to purchase 14,847
shares of Common Stock on the Closing Date. The Warrants shall have a three
year term and an exercise price of 110% of the Purchase Price Per Share.
c. Form of Payment. The Buyer shall pay the purchase price for the Shares by
delivering immediately available good funds in United States Dollars to
Xxxxxx X. XxXxxxx as the escrow agent (the "Escrow Agent"). Upon
confirmation that the funds are received, within two business days
following payment by the Buyer to the Escrow Agent of the purchase price of
the Common Stock, the Company shall deliver a Certificate for the Common
Stock duly executed on behalf of the Company, to the Escrow Agent.
d. Method of Payment. Payment into escrow of the purchase price for the Common
Stock shall be made by wire transfer of funds to:
First Union Bank of Connecticut
000 Xxxx Xxxxxx, X. X. Xxx 000
Xxxxxxxx, XX 00000-0000
ABA #: 000000000
Swift #: XXXXXX00
Account #: 00000-0000000-0
Xxxx.Xxxx: Xxxxxx X. XxXxxxx, Esq. Trustee Account
Not later than 4:00 p.m., Eastern Standard Time, on or before December 10, 1999,
the Buyer shall wire the Purchase Price to the Escrow Agent. On December 13,
1999 the Company shall deliver the certificate representing the Shares being
purchased to the Escrow Agent. Once the Escrow Agent is in possession of the
certificate representing the Shares being purchased and has received the
Purchase Price into his escrow account he shall notify the Company and wire the
Purchase Price in accordance with instructions received from the Company, less a
8% placement fee, to the Company and overnight the certificate representing the
Shares to the Buyer. Time is of the essence with respect to such payment, and
failure by the Buyer to make such payment, shall allow the Company to cancel
this Agreement.
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The Escrow Agent shall not be liable for any action taken or omitted by him
in good faith and in no event shall the Escrow Agent be liable or responsible
except for the Escrow Agent's own gross negligence or willful misconduct. The
Escrow Agent has made no representations or warranties in connection with this
transaction and has not been involved in the negotiation of the terms of this
Agreement or any matters relative thereto. The Buyer and the Company each agree
to indemnify and hold harmless the Escrow Agent from and with respect to any
suits, claims, actions or liabilities arising in any way out of this transaction
including the obligation to defend any legal action brought which in any way
arises out of or is related to this Agreement. The Escrow Agent is not rendering
securities advice to anyone with respect to this proposed transaction; nor is
the Escrow Agent opining on the compliance of the proposed transaction under
applicable securities law.
2. BUYER REPRESENTATIONS, WARRANTIES; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the Company
as follows:
a. The Buyer is purchasing the Shares for its own account for investment only
and not with a view towards the resale, public sale or distribution thereof and
not with a view to or for sale in connection with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term is defined in Rule 501
of the General Rules and Regulations under the 1933 Act by reason of Rule
501(a)(3), and (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Securities;
c. All subsequent offers and sales of the Securities by the Buyer shall be made
pursuant to registration under the 1933 Act or pursuant to an exemption from
registration;
d. The Buyer understands that the Securities are and will be, as the case may
be, offered and sold, to it in reliance on specific exemptions from the
registration requirements of federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgements and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to receive and
offer of and acquire the Common Stock and of the Securities, as the case may be;
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e. The Buyer and its advisors, if any, have either been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by the Buyer or have had access thereto. The Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company and
have received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Buyer has also had the opportunity
to obtain and to review the Company's (1) Quarterly Reports on Form 10-QSB for
the fiscal quarter ended March 31, 1999, and (2) Forms 8-K, if any, filed since
March 31, 1999, the Company's Form 10KSB for the period ended December 31, 1998,
the Company's Proxy Statement for its 1999 annual shareholder's meeting, as well
as copies of the Company's press releases since March 31, 1999 (the "Company's
SEC Documents").
f. The Buyer understands that its investment in the Securities involves a high
degree of risk;
g. The Buyer understands that no federal or state agency or any other government
or governmental agency has passed on or made any recommendation or endorsement
of the Securities;
h. This Agreement has been duly and validly authorized, executed and delivered
on behalf of the Buyer and is a valid and binding agreement of the Buyer
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. No Short Sales. Buyer expressly agrees that until such time it has sold all
of the Securities that it shall not, directly or indirectly, through an
affiliate (as that term is defined under Rule 405 promulgated under the 0000
Xxx) or by, with or through an unrelated third party or entity, whether or not
pursuant to a written or oral understanding, agreement, arrangement, scheme, or
artifice of any nature whatsoever, engage in the short selling of the Company's
Common Stock or any other equity securities of the Company whether now existing
or hereafter issued, or engage in any other activity of any nature whatsoever
that has the same affect as a short sale, or is a de facto or de jure short
sale, of the Company's Common Stock or any other equity security of the Company
whether now existing or hereafter issued, including but not limited to the sale
of any rights pursuant to any understanding, agreement, arrangement, scheme or
artifice of any nature whatsoever, whether oral or in writing, relative to the
Company's Common Stock or any other equity securities of the Company whether now
existing or hereafter created.
j. The Buyer is not purchasing the Securities as a result of, or pursuant to,
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar or meeting whose attendees, including the Buyer, had
been invited by any general advertising or general solicitation.
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3. COMPANY REPRESENTATIONS
The Company represents and warrants to the Buyer that:
a. Concerning the Shares. The Shares have been duly authorized and, when paid
for as provided herein, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. There are no preemptive rights of any stockholder
of the Company, as such, to acquire the Common Stock.
b. Reporting Company Status. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified as a foreign corporation in all jurisdictions in which the
failure to so qualify would have a material adverse effect on the Company and
its subsidiaries taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Common Stock is listed and traded on The Nasdaq Small
Cap Market . The Company has filed all material required to be filed pursuant to
all reporting obligations under either Section 13(a) or l5(d) of the Exchange
Act, and has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such listing.
c. Stock Purchase Agreement; Registration Rights Agreement and Stock. This
Agreement and the Registration Rights Agreement, the form of which is attached
hereto (the "Registration Rights Agreement"), have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
by the Company and this Agreement is, and the Registration Rights Agreement,
when executed and delivered by the Company, will be, valid and binding
agreements of the Company enforceable in accordance with their respective terms,
subject as to enforceability to general principles of equity, the
indemnification provisions of the Registration Rights Agreement, and to
bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally; and the Securities will be duly and
validly issued, fully paid and non-assessable when delivered on behalf of the
Company upon payment therefor in accordance with this Agreement, subject to
general principles of equity and to bankruptcy, insolvency, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally.
d. Non-contravention. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company, the issuance of the Securities,
and the consummation by the Company of the other transactions contemplated by
this Agreement, the Registration Rights Agreement, and the Common Stock do not
and will not conflict with or result in a breach by the Company of any of the
terms or provisions of or constitute a default under, the articles of
incorporation or by-laws of the Company, or any material indenture, mortgage,
deed of trusts or other material agreement or instrument to which the Company is
a party or by which it or any of its properties or assets are bound,
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or any material existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have a material adverse effect on
the transactions contemplated herein.
e. Approvals. No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market is required to be obtained by the Company for the issuance and sale of
the Securities to the Buyer as contemplated by this Agreement.
f. SEC Filings. None of the Company's filings with the Securities and Exchange
Commission since March 31, 1999 contained, at the time they were filed, any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements made therein in light of the circumstances under which
they were made, not misleading. The Company has since June 1, 1998 filed all
requisite forms, reports and exhibits thereto with the Securities and Exchange
Commission.
g. Absence of Certain Changes. Since March 31, 1999, there has been no material
adverse change and no material adverse development in the business, properties,
operations, financial condition, outstanding securities, or results of
operations of the Company, except as disclosed in the documents referred to in
Section 2(f) hereof.
h. Full Disclosure. There is no fact known to the Company (other than general
economic conditions known to the public generally) that has not been disclosed
in writing to the Buyer (including through the publicly filed documents of the
Company) that (i) could reasonably be expected to have a material adverse effect
on the condition (financial or otherwise) or in the earnings, business affairs,
properties or assets of the Company or (ii) could reasonably be expected to
materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement.
i. Absence of Litigation. Except as disclosed in the documents referred to in
Section 2(f) hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company or any of its subsidiaries, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business, condition (financial or other), or results of operations
of the Company and its subsidiaries taken as a whole or the transactions
contemplated by this Agreement or any of the documents contemplated hereby or
which would materially adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents. Notwithstanding the foregoing, the
Company has disclosed to Buyer the existence of certain litigation against the
Company by a former employee, entitled McGillin v. Frontline Communications. The
litigation is in the early stages, and it cannot be determined whether such
litigation will have a material adverse affect on the Company's operations.
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j. Absence of Events of Default. Except as disclosed in writing to the Buyer
(including through the publicly filed documents of the Company) no Event of
Default, as defined in any agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (as so defined), has occurred and is continuing,
which would have a material adverse effect on the Company's financial condition
or results of operations.
k. No Default. Except as disclosed in writing to the Buyer (including through
the publicly filed documents of the Company) the Company is not in default in
the performance or observance of any material obligation, agreement, covenant or
condition contained in any material indenture, mortgage, deed of trust or other
material instrument or agreement to which it is a party or by which it or its
property may be bound, and neither the execution nor the performance by the
Company of its obligations under this Agreement or the delivery of the Shares,
will conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under, any
material indenture, mortgage, deed of trust or other material agreement or
instrument to which the Company is a party or by which it is bound or any
statute or the Certificate of Incorporation or By-laws of the Company, or any
decree, judgment, order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or its properties, or its listing
agreement with respect to any securities exchange or trading market on which the
Common Stock is listed.
l. Prior Issues. During the twelve (12) months preceding the date hereof, the
Company has not issued any debt securities or convertible securities in capital
transactions which have not been fully disclosed in the Company's SEC Documents.
Except for employee restricted stock, employee stock options and the 10 shares
of convertible preferred issued in October 1998, all such issuances have been
fully converted into shares of common stock and there are no outstanding
unconverted debt or convertible securities from those transactions, except as
disclosed in the SEC Documents.
m. Finder. Merchant Bancorp of America, Reg'd (the "Finder") shall receive a
placement fee of 8% of all funds raised, payable in cash from escrow at closing.
The Finder shall also receive Warrants to purchase 3,707 shares of Common Stock
on the Closing Date.) The Warrants shall have a three year term and an exercise
price per share of 110% of the Purchase Price Per Share.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Securities have
not been and are not being registered under the provisions of the 1933 Act and,
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder, or (B) the Buyer shall have
delivered to the Company an opinion of
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counsel, reasonably satisfactory in form, scope and substance to the Company and
its counsel, to the effect that the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration; (2) any
sale of the Securities made in reliance on Rule 144 promulgated under the 1933
Act may be made only in accordance with the terms of said Rule and further, if
said Rule is not applicable, any resale of such Securities under circumstances
in which the seller, or the person through whom the sale is made, may be deemed
to be an underwriter, as that term is used in the 1933 Act, may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (3) neither the Company nor any other
person is under any obligation to register the Securities (other than pursuant
to the Registration Rights Agreement) under the 1933 Act or to comply with the
terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that until such time as
the Common Stock have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement and sold in accordance with such Registration
Statement, the shares of Common Stock, shall bear a restrictive legend in
substantially the following form (and a stop transfer order may be placed
against transfer of the shares of Common Stock):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS OR PURSUANT TO A REGISTRATION STATEMENT.
c. Registration Rights Agreement. The parties hereto agree to enter into the
Registration Rights Agreement on or before the Closing Date (as hereinafter
defined).
d. Filings. The Company undertakes and agrees to make all necessary filings in
connection with the sale of the Common Stock to the Buyer as required by United
States securities laws and regulations, or by Nasdaq. Buyer agrees to make all
necessary filings with the SEC, including Schedule 13D, if applicable.
e. Reporting Status. Provided the Buyer beneficially owns any of the Shares, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination. Notwithstanding the
foregoing, the provisions of this clause shall terminate once the Buyer becomes
eligible to sell the Common Stock issued in this transaction pursuant to Rule
144.
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f. Use of Proceeds. The Company will use the proceeds from the sale of the
Shares (excluding amounts paid by the Company for legal fees and finder's fees
in connection with the sale of the Common Stock) for working capital and
acquisition costs and shall not, except for investment in the companies to be
acquired with the proceeds of this transaction, directly or indirectly (except
in any situation where the Company is acquired by merger or otherwise by a third
party) use such proceeds for any loan to or investment in any other corporation,
partnership enterprise or other person.
g. Certain Agreements. For the six months following the Closing Date (i.e.,
December 10, 1999), the Company will not raise any Regulation D financing and/or
private placement with common stock registration/public resale rights into
equity markets solely for the purpose of raising working capital, unless the
shares of common stock so sold are restricted from re-sale. In the event the
Company breaches the terms of this subsection, the Buyer shall have the option
of either (i) exercising its Demand Redemption as set forth in Section 5(i)
hereof or (ii) completely replacing the terms of this Stock Purchase Agreement
with the terms of the other agreement, which terms shall be applied to the
balance of the Purchase Price in Common Stock still held by the Buyer together
with any accrued interest and any accumulated liquidated damages.
5. ISSUANCE OF ADDITIONAL SHARES BASED UPON REPRICING RIGHTS; REDEMPTION TERMS.
a. Repricing Rights. Subject to Section 1(a), the Buyer is entitled to one
Repricing Right for each share of Common Stock purchased under the terms of this
Agreement. The Repricing Rights entitle the Buyer to acquire additional shares
(the "Additional Shares") of Common Stock (or its cash equivalent) for each
share sold on the date of the Exercise Notice (in the form annexed hereto as
Exhibit A), equal to the number of Repricing Rights exercised multiplied by a
fraction, the numerator of which is the difference between the Repricing Price
and the Market Price (as defined herein) and the denominator of which is the
Market Price. The Repricing Price, will be initially set at 120% of the Purchase
Price Per Share (as defined in Section 1(a) above) and increase by two and
one-half percentage points per six month period thereafter. The Market Price
shall be calculated at the average closing bid price of the Common Stock for the
five trading days preceeding the date an Exercise Notice is tendered to the
Company via facsimile transmission. The Exercise Notice shall state the number
of shares of Common Stock sold by the Buyer on the date of the Exercise Notice.
A Repricing Right may only be exercised on the date of, and in connection with,
a sale of the underlying Common Stock.
At any time after 120 days following the Closing Date, the Buyer will
be permitted to exercise up to 25% per calendar month cumulatively, of their
Repricing Rights. Notwithstanding the foregoing, provided that the Buyer has
exhausted its repricing rights under the Initial Agreement dated March 25, 1999,
the second tranche agreement dated July 8, 1999, and the third tranche agreement
dated October 7, 1999, the Buyer shall be permitted to exercise up to 35% per
calendar month cumulatively, of their repricing rights. The Company may, at its
sole option, pay the Buyer the cash value of the Repricing Right
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in lieu of additional shares upon receiving a Exercise Notice by confirming the
same within two business days and wiring the cash value of the Repricing Right
to the Buyer within 5 business days of receipt of the Exercise Notice (except if
the cash value of the Repricing Right exceeds $50,000, the Company shall have
fourteen (14) calendar days to make said payment).
After effectiveness of the registration statement covering the Common
Stock being purchased, if (i) the Company's Common Stock price appreciates to
more than 127.5% of the closing sales price as of the Closing Date, as reported
by Nasdaq (ii) the average trading volume equals or exceeds the average trading
volume during the calendar month preceeding the Closing Date and (iii) both (i)
and (ii) are sustained for a period of at least thirty (30) consecutive calendar
days, then 25% of the total number of Repricing Rights will expire per each
thirty (30) consecutive calendar day period in which the requirements of (i),
(ii) and (iii) have been met, so long as the Company is in compliance in all
material respects with its obligations to the Buyer under this Agreement and the
Registration Rights Agreement. The Repricing Rights will expire in their
entirety 14 months after the effectiveness of the Registration Statement.
b. Additional Shares. The Additional Shares shall be fully paid, non-assessable
Common Stock of the Company, bearing no restrictive legends (other than those
required under the '33 Act), not subject to any stop transfer instructions and
registered pursuant to the terms of the Registration Rights Agreement, a copy of
which is attached hereto. In the event the Company is required to issue
Additional Shares, and does not have a sufficient number of shares of Common
Stock available to be issued, the Company shall pay the Buyer the cash value of
the Repricing Right as set forth in Section 5(c) below.
c. Redemption Terms and Floor Price. (i) The Company may opt to pay the Buyer
the cash value of the Repricing Right in lieu of additional shares upon
receiving a Exercise Notice by confirming the same within two business days. In
the event that the Company elects to pay the cash value of the Repricing Rights
in excess of $50,000, the Company shall have 14 calendar days to make such
payment. The Company may also elect to notify the Buyer within 7 business days
advance notice that any future exercise of Repricing Rights shall be redeemed
for cash in lieu of issuing additional shares. If the Company defaults in timely
payment, then all future redemptions must be paid within 7 calendar days.
(ii) During the six month period following the Closing Date, an initial
Floor Price below which the Buyer shall not be entitled to exercise its
Repricing Rights will be set at $4.00. If the closing bid price of the Company's
Common Stock falls below $4.00 at any time after the Buyer is entitled to
exercise repricing rights, the Buyer may demand redemption at market value for
the outstanding balance of the Repricing Rights and Common Stock. In the event
the Buyer elects to redeem, the Company shall have 60 calendar days from the
date that such notice is given to make the redemption payment. If the Company
defaults, the Buyer will be permitted to continue exercising its Repricing
Rights subject to the limit set forth in Section 1(a).
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(iii) In addition, at any time prior to 120 days following the Closing
Date, the Company may elect to redeem the total number of shares of Common Stock
issued to the Buyer for $900,000, or a portion of said shares at a pro rata
price equal to 120% of the Purchase Price Per Share as set forth in section
1(a).
d. The Company shall not issue any fractional shares of Common Stock as a result
of this Section 5. In the event additional shares are required to be issued
hereunder, and the numbers of shares to be issued is not a whole number, then
the number of shares to be issued will be rounded down to the nearest whole
number.
e. The Company shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of Additional Shares. However, the Holder shall pay any such
taxes which are due because such shares are issued in a name other than its
name.
f. Subject to the limitation set forth in section 1(a) , the Company shall use
reasonable efforts to reserve out of its authorized but unissued Common Stock
enough shares of Common Stock to permit the issuance of all of the Additional
Shares required to be issued hereunder. All Additional Shares shall be, when
issued in accordance herewith, duly authorized, validly issued, fully-paid and
nonassessable.
g. The Company shall pay Buyer a cash fee of 2% of the Purchase Price per thirty
calendar day period (or a pro rata amount thereof), for the period that the
following obligations remain unsatisfied: (i) if the Repricing Rights of the
Buyer are suspended for any reason; or (ii) if the Company fails to deliver
shares pursuant to the exercise of Repricing Rights within 7 business days of
company's receipt of a facsimile Exercise Notice in the form annexed hereto as
Exhibit A, and/or fails to make a cash payment within the time periods set forth
in this Agreement or the Registration Rights Agreement, as the case may be. The
Company acknowledges that its suspension of the Repricing Rights, failure to
deliver shares pursuant to the exercise of the Repricing Rights and/or failure
to make a cash payment in a timely manner will cause the Buyer to suffer damages
in an amount that will be difficult to ascertain. Accordingly, the parties agree
that it is appropriate to include in this Agreement a provision for liquidated
damages. The parties acknowledge and agree that the liquidated damages provision
set forth in this section represents the parties' good faith effort to quantify
such damages and, as such, agree that: 1) the form and amount of such liquidated
damages are reasonable and will not constitute a penalty; and 2) said liquidated
damages constitute the Buyer's only remedy. The payment of liquidated damages
shall not relieve the Company from its obligations to deliver Common Stock or
honor Repricing Rights pursuant to the terms of this Agreement.
h. Demand Redemption. In the event any default by the Company under the terms of
this Agreement is continuing for more than 180 calendar days, Buyer may at its
sole option send written notice of a demand redemption to the Company. Upon
receipt of the written notice from the Buyer, the Company shall within 10
business days make a cash payment to Buyer equal to the cash value of Buyer's
then outstanding Repricing Rights and Shares as of the date
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that written notice is received by the Company. The cash payment to be made by
the Company upon receipt of written notice of the demand redemption, shall be in
addition to any remedies or liquidated damages to which the Investor is entitled
up to the date written notice of the demand redemption is received by the
Company.
i. Limits on Amount of Ownership. In no event shall the Buyer be entitled to
exercise that number of Repricing Rights in excess of the amount upon exercise
of which the sum of (1) the number of shares of Common Stock beneficially owned
by the Buyer and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of
the Repricing Rights), and (2) the number of shares of Common Stock issuable
upon exercise of the Repricing Rights with respect to which the determination of
this provision is being made, would result in beneficial ownership by the Buyer
and its affiliates of more than 4.9% of the outstanding shares of Common Stock
of the Company. For purposes of this provision, beneficial ownership shall be
determined in accordance with Section 13 (d) of the Securities Exchange Act of
1934, as amended, and Regulation 13 D-G thereunder, except as otherwise provided
in clause (1) of such provision.
6. Adjustments
a. Stock dividends; splits. If after the date on which the Shares are first
issued to Buyer and while Buyer still owns said Shares, the number of
outstanding shares of Common Stock is increased by a stock dividend payable in
shares of Common Stock or by a split of shares of Common Stock or other similar
event, then, on the date following the date fixed for the determination of
holders of Common Stock entitled to receive such stock dividend or split, the
number of shares of Common Stock purchased by the Buyer and the number of
Repricing Rights shall be increased in proportion to such increase in
outstanding shares (ignoring for this purpose any provision for the repurchase
or cash payment of fractional shares).
b. Aggregation of shares. If after the date on which the Shares are first issued
to Buyer and while Buyer still owns said Shares, the number of outstanding
shares of Common Stock is decreased by a consolidation, combination or
reclassification of shares of Common Stock or other similar event, then, after
the effective date of such consolidation, combination or reclassification, the
number of shares of Common Stock purchased by the Buyer and the number of
Repricing Rights shall be decreased in proportion to such decrease in
outstanding shares (ignoring for this purpose any provision for the repurchase
or cash payment of fractional shares).
c. Reorganization, etc. If after the date on which the Shares are is first
issued to the Buyer, any capital reorganization or reclassification of the
Shares, or consolidation or merger of the Company with another corporation, or
the sale of all or substantially all of its assets to another corporation or
other similar event shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger, or sale, lawful and
fair provision shall be made whereby the Buyer shall thereafter have the right
to purchase and receive upon the basis and upon the terms and conditions
specified in this
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Agreement such shares of stock, securities, or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented by this Agreement had such reorganization, reclassification,
consolidation, merger, or sale not taken place, and in such event appropriate
provision shall be made with respect to the rights and interests of the Buyer to
the end that the provisions hereof shall thereafter be applicable, as nearly as
may be in relation to any share of stock, securities, or assets thereafter
deliverable upon the exercise hereof. The Company shall not effect any such
consolidation, merger, or sale unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing such assets, shall assume
by written instrument executed and delivered to the Agent the obligation to
deliver to the Buyer such shares of stock, securities, or assets as, in
accordance with the foregoing provisions, the Buyer may be entitled to purchase.
Upon the occurrence of any event specified in this section, the Company shall
give written notice of the record date for such dividend, distribution, or
subscription rights, or the effective date of such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, winding
up or issuance. Such notice shall also specify the date as of which the holders
of Common Stock of record shall participate in such dividend, distribution, or
subscription rights, or shall be entitled to exchange their Common Stock for
stock, securities, or other assets deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, winding
up or issuance. Failure to give such notice, or any defect therein shall not
affect the legality or validity of such event.
d. Notices of Changes. Upon every adjustment of the number of shares of Common
Stock purchased by the Buyer and the number of Repricing Rights, the Company
shall give written notice thereof to the Buyer, which notice shall state the
increase or decrease, if any, in the number of shares of Common Stock purchased
by the Buyer and the number of Repricing Rights, setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based.
7. TRANSFER AGENT INSTRUCTIONS.
(i) Promptly following the delivery by the Buyer of the aggregate purchase price
for the Shares in accordance with Section l(c) hereof the Company will instruct
its transfer agent to issue certificates for the Shares purchased, bearing the
restrictive legend specified in Section 4(b) of this Agreement. The Shares shall
be registered in the name of the Buyer or its nominee (duly assigned to), and in
such denominations to be specified by the Buyer. If the Buyer provides the
Company with an opinion of counsel reasonably satisfactory to the Company and
its counsel that registration of a resale by the Buyer of any of the Securities
in accordance with clause (1)(B) of Section 4(a) of this Agreement is not
required under the 1933 Act, the Company shall (except as provided in clause (2)
of Section 4(a) of this Agreement) permit the transfer of the Securities. (ii)
After effectiveness of a Registration Statement, and upon receipt of an Exercise
Notice in the form annexed hereto as Exhibit A, the Company shall deliver the
number of shares specified in the Notice to the Buyer, free of any restrictive
legend (except for any legend
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required under the '33 Act) or stop transfer instructions, to the address
specified in the notice within seven (7) business days of the Company's receipt
of the notice.
8. DELIVERY INSTRUCTIONS.
The Shares shall be delivered by the Company to the Escrow Agent pursuant to
Section l(c) hereof on a delivery against payment basis at the closing.
9. CLOSING DATE.
The date and time of the issuance and sale of the Shares (the "Closing Date")
shall be December 10, 1999. The closing shall occur on the Closing Date at the
offices of the Escrow Agent. Notwithstanding anything to the contrary contained
herein, the Escrow Agent will be authorized to release the funds representing
the Purchase Price for the Common Stock, and the certificates representing the
shares of the Common Stock only upon satisfaction of the conditions set forth in
Sections 10 and 11 hereof.
10. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Shares to the
Buyer pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Company of such Agreement as evidenced by
execution of such Agreement;
b. The accuracy on the Closing Date of the representations and warranties of the
Buyer contained in this Agreement as if made on the Closing Date and the
performance by the Buyer on or before the Closing Date of all covenants and
agreements of the Buyer required to be performed on or before the Closing Date;
c. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
11. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Common Stock
is conditioned upon:
a. Acceptance by Buyer of an Agreement for the sale of Shares, as indicated by
execution of this Agreement;
b. Delivery by the Company to the Escrow Agent of the certificate representing
the Shares in accordance with this Agreement;
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c. The accuracy on the Closing Date of the representations and warranties of the
Company contained in this Agreement as if made on the Closing Date and the
performance by the Company on or before the Closing Date of all covenants and
agreements of the Company required to be performed on or before the Closing
Date; and
d. The Company shall have its counsel prepare an opinion letter concerning the
authority of the Company to make this offering. The Company shall also prepare a
Board Resolution authorizing this offering. The opinion letter and Board
Resolution shall be delivered to the escrow agent who shall deliver a copy to
the Buyer.
12. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Delaware. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
13. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given upon personal delivery or seven business days after deposit in the United
States Postal Service, by (a) advance copy by fax, and (b) mailing by express
courier or registered or certified mail with postage and fees prepaid, addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by ten days advance written
notice to each of the other parties hereto.
COMPANY: Xxxxxxx Xxxx-Xxxxxxxx, President
Frontline Communications Corp.
Xxx Xxxx Xxxx Xxxxx, 0X Xxxxx
P. O. Xxx 0000
Xxxxx Xxxxx, XX 00000
Telecopier No.: 0-000-000-0000
15
with a copy to: Xxxxxxx Xxxxx, Esq.
Xxxxxx Xxxxxxxxxx, LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Telecopier No.: 1-212-885-5001
BUYER: At the address set forth on the signature page of
this Agreement.
ESCROW AGENT: Xxxxxx X. XxXxxxx, Esq.
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000
Telecopier No.: 0-000-000-0000
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each party's representations and
warranties shall survive the execution and delivery hereof of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer or one of
its officers thereunto duly authorized as of the date set forth below.
NUMBER OF SHARES OF COMMON STOCK TO BE PURCHASED: 135,870
AGGREGATE PURCHASE PRICE OF SUCH COMMON STOCK: $5.52
SIGNATURES FOR ENTITIES
INVESTOR #1:
IN WITNESS WHEREOF, the undersigned represents that the foregoing statements are
true and correct and that it has caused this Stock Purchase Agreement to be duly
executed on its behalf this _______day of October, 1999.
----------------------------- ---------------------------------
Address Canadian Advantage Limited Partnership
Printed Name of Subscriber
Telecopier No. ______________ By:______________________________
(Signature of Authorized Person)
--------------------- ------------------------------
Jurisdiction of Incorporation Printed Name and Title
or Organization
Federal Identification No.: _________________________
INVESTOR #2:
IN WITNESS WHEREOF, the undersigned represents that the foregoing statements are
true and correct and that it has caused this Stock Purchase Agreement to be duly
executed on its behalf this _______day of December, 1999.
----------------------------- ---------------------------------
Address Aberdeen Avenue LLC
Printed Name of Subscriber
Telecopier No. ______________ By:______________________________
(Signature of Authorized Person)
--------------------- ------------------------------
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Jurisdiction of Incorporation Printed Name and Title
or Organization
Federal Identification No.: _________________________
This Agreement has been accepted as of the date set forth below.
FRONTLINE COMMUNICATIONS CORP
By: _____________________________ Date:____________________
Printed Name and Title: __________________________________________
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