Exhibit 10.16
REGISTRATION RIGHTS AGREEMENT
between
FRONTLINE COMMUNICATIONS CORPORATION
and
IIG EQUITY OPPORTUNITIES FUND LTD.
April 3, 2003
TABLE OF CONTENTS
Page
Section 1. Certain Definitions.............................................1
Section 2. Registration Rights.............................................2
2.1 Demand Registration.............................................2
2.2 Form S-3 Registration...........................................4
2.3 Piggyback Registration..........................................4
2.4 Limitations on Subsequent Registration Rights...................5
2.5 Designation of Underwriter......................................5
2.6 Expenses of Registration........................................5
2.7 Registration Procedures.........................................6
2.8 Indemnification.................................................8
2.9 Underwriting Agreement.........................................11
2.10 Information by Holder..........................................11
2.11 Transfer of Registration Rights................................11
2.12 Termination of Registration Rights.............................12
2.13 Delay of Registration; Furnishing of Information...............12
2.14 Amendment of Registrable Rights................................12
2.15 Limitation on Subsequent Registration Rights...................12
2.16 Liquidated Damages.............................................12
Section 3. Miscellaneous..................................................13
3.1 GOVERNING LAW..................................................13
3.2 Successor and Assigns..........................................14
3.3 Effectiveness..................................................14
3.4 Adjustments for Stock Splits, Etc..............................14
3.5 Remedies.......................................................14
3.6 Entire Agreement; Amendment....................................14
3.7 Notices, Etc...................................................15
3.8 Delays or Omissions............................................16
3.9 Severability...................................................16
3.10 Titles and Subtitles...........................................16
3.11 Gender.........................................................16
3.12 Counterparts...................................................16
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Exhibit 10.16
THIS REGISTRATION RIGHTS AGREEMENT dated as of April 3, 2003, between
FRONTLINE COMMUNICATIONS CORPORATION, a Delaware corporation (the "Company"),
and IIG EQUITY OPPORTUNITIES FUND LTD., a Bermuda company (the "Lender").
Recitals
The Company is entering into a Term Loan and Security Agreement (the
"Loan Agreement") dated as of the date hereof, with the Lender and Proyecciones
Y Ventas Organizadas, S.A. De C.V., a Mexico corporation, pursuant to which,
among other things, the Company is issuing to the Lender 500,000 shares of
Common Stock (the "Shares"). In order to induce the Lender to enter into the
Loan Agreement, the Company wishes to grant registration rights to the Lender as
more fully set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereby agree as follows:
Section 1. Certain Definitions.
Capitalized terms used in this Agreement and not defined herein shall
have the meanings ascribed to them in the Loan Agreement. As used in this
Agreement, the following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock of the Company, par value
$.01 per share, and any other securities issued in respect of Common Stock upon
any stock split, stock dividend, recapitalization, merger, consolidation, share
exchange or similar event.
"Effectiveness Date" means the ninetieth (90th) day following the
filing of a registration statement pursuant to this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Holder" shall mean the Lender and any Person holding Registrable
Securities to whom the rights under this Agreement have been transferred in
accordance with Section 2.11 hereof.
"Initiating Holders" shall mean any Holder(s) who in the aggregate are
Holders of not less than 30% of the Registrable Securities then outstanding.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the automated quotation system of the NASD.
"Term Note" has the meaning given to such term in the Loan Agreement.
"Person" means any individual, any foreign or domestic corporation,
general partnership, limited partnership, limited liability company, firm, joint
venture, association, individual retirement account, joint stock company, trust,
estate, unincorporated organization, governmental or regulatory body or other
entity.
"Registrable Securities" shall mean (a) the Shares, and (b) any shares
of Common Stock of the Company issued as (or issuable upon conversion or
exercise of any warrant, right or other security which is as issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such above-described securities, provided, however, that
securities shall be treated as Registrable Securities only if and only for so
long as they are held by a Holder or a permitted transferee pursuant to the
terms hereof, and (i) they have not been disposed of pursuant to a registration
statement declared effective by the Commission, (ii) they have not been sold in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act, so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale, or (iii)
the registration rights as to the Holder of such Registrable Securities have not
expired pursuant to Section 2.12.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Securities" means "securities" as defined in Section 2(1) of the
Securities Act and includes capital stock or other equity interests or any
options, warrants or other securities that are directly or indirectly
convertible into, or exercisable or exchangeable for, capital stock or other
equity interests.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute and the rules and regulations of the Commission
thereunder, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time.
"Shares" shall mean the 500,000 shares of Common Stock issued to the
Lender pursuant to the Loan Agreement.
Section 2. Registration Rights.
2.1 Demand Registration.
(a) Request for Registration. In case the Company shall receive from
the Initiating Holders, on or after August 1, 2003, a written request that the
Company effect any registration under the Securities Act of Registrable
Securities then outstanding in accordance with this Section 2.1, the Company
will:
(i) promptly, and in no event more than five (5) days after
receipt of such written request, give written notice of the proposed
registration to all other Holders
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and file a registration statement to effect such registration within thirty
(30) days of receipt of such written request of the Initiating Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act and
any other governmental requirements or regulations) as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any
Holders joining in such request each as are specified in a written request
(which request shall specify the number of Registrable Securities proposed
to be included in such registration) received by the Company within 10 days
after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to take any action to effect any
such registration, qualification or compliance pursuant to this Section 2.1
after the Company has effected one such registration which may be effected
at the option of the Holders pursuant to this Section 2.1(a) and such
registration has been declared or ordered effective.
(b) With respect to any registration pursuant to this Section 2.1, if
the managing underwriter advises the Company in writing that the inclusion of
all Registrable Securities proposed to be included in such registration would
interfere with the successful marketing of such Securities, then there shall be
excluded from such registration and underwriting, to the extent necessary to
satisfy such limitation, first the Securities held by stockholders of the
Company other than the Holders, then Securities which the Company may wish to
register for its own account, and thereafter, to the extent necessary,
Registrable Securities held by the Holders (pro rata to the respective number of
Registrable Securities requested by the Holders to be included in the
registration); provided, however, that in any event, all Registrable Securities
must be included in such registration prior to any other Securities.
(c) The Company shall be entitled to register Securities for sale for
its own account in any registration requested pursuant to this Section 2.1 as
permitted to do so by the underwriters and Section 2.1(b).
(d) A requested registration under this Section may be rescinded by
written notice to the Company by the Holders holding a majority of the
Registrable Securities to be included in such registration under the following
circumstances:
(i) If such registration statement is rescinded prior to the
filing date, such rescinded registration shall not count as a registration
statement initiated pursuant to this Section 2.1 for purposes of Section
2.1(a);
(ii) If such registration statement is rescinded after the filing
date but prior to its effective date, such rescinded registration shall not
count as a registration statement initiated pursuant to this Section 2.1
for purposes of Section 2.1(a) if the participating Holders reasonably
believed that the registration statement contained an untrue statement of
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements made therein not misleading,
(1) notified the
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Company of such fact and requested that the Company correct such alleged
misstatement or omission and (2) the Company refused to correct such
alleged misstatement or omission; and
(iii) A registration shall not count as a registration statement
initiated pursuant to this Section 2.1 for purposes of Section 2.1(a) above
unless it becomes effective and the participating Holders are able to sell
all of the Registrable Securities sought to be included in such
registration statement.
(e) The Company may not cause any other registration of Securities for
sale for its own account (other than a registration effected solely to implement
an employee benefit plan or stock option plan or a transaction contemplated by
Rule 145 of the Commission) to be initiated after a registration requested
pursuant to Section 2.1 and to become effective less than 90 days after the
effective date of any registration requested pursuant to Section 2.1.
2.2 Form S-3 Registration.
(a) In case the Company shall receive from any Holder or Holders, on
or after August 1, 2003, a written request or requests that the Company effect a
registration, the Company shall use its best efforts to effect such registration
on Form S-3, or any successor Commission short-form registration statement with
respect to Registrable Securities, if Form S-3 is available for such offering by
the Holders under applicable federal securities laws. The Company will, within
five (5) days after receipt of any such request, give written notice of the
proposed registration to all other Holders, and include in such registration all
Registrable Securities held by all such Holders who wish to participate in such
registration and provide the Company with written requests for inclusion therein
within ten (10) days after the receipt of the Company's notice. The Company
shall file a registration statement to effect such registration within thirty
(30) days of receipt of such initial written request of Holder or Holders and,
as soon as practicable, effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holder's or Holders' Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any other Holder or Holders joining in such
request as provided herein.
(b) There is no limitation on the number of registrations pursuant to
this Section 2.2 that the Company is obligated to effect.
(c) Registrations effected pursuant to this Section 2.2 shall not be
counted as demands for registration or registrations pursuant to Section 2.1.
2.3 Piggyback Registration.
If the Company, at any time, proposes to register any of its
Securities under the Securities Act, other than pursuant to Section 2.1 or
Section 2.2, it shall promptly, and in no event less than fifteen (15) days
prior to the filing of a registration statement with respect to a registration
under this Section 2.3, give written notice to each Holder of such intention.
Upon the written request of any Holder given within ten (10) days after receipt
of any such notice, the Company shall include in such registration all of the
Registrable Securities indicated in such
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request, so as to permit the disposition of the Registrable Securities on the
same terms and conditions as the Securities of the Company otherwise being sold
in such registration. If a Holder decides not to include all of its Registrable
Securities in any registration statement thereafter filed by the Company, such
Holder shall nevertheless continue to have the right to include any Registrable
Securities in any subsequent registration statement or registration statement as
may be filed by the Company with respect to offerings of its securities, all
upon the terms and conditions set forth herein. Notwithstanding any other
provision of this Section 2.3, if the managing underwriter advises the Company
in writing that the inclusion of all Registrable Securities proposed to be
included in such registration would interfere with the successful marketing of
such Securities of the Company, then there shall be excluded from such
registration and underwriting, to the extent necessary to satisfy such
limitation, first Securities of the Company held by stockholders of the Company
other than the Holders and then, to the extent necessary, Registrable Securities
held by the Holders (pro rata to the respective number of Registrable Securities
requested by the Holders to be included in such registration); provided,
however, that in any event, all Registrable Securities must be included in such
registration prior to any other Securities.
2.4 Limitations on Subsequent Registration Rights.
The Company represents and warrants to the Lender that the
registration rights granted hereby do not conflict with any other registration
rights granted by the Company. The Company shall not, after the date hereof,
grant any registration rights which conflict with or impair, or have any
priority over, the registration rights granted hereby.
2.5 Designation of Underwriter.
(a) In the case of any registration effected pursuant to Sections 2.1
or 2.2, the right of any Holder to include its Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders (which
underwrite or underwriters shall be reasonably acceptable to the Company).
(b) In the case of any registration initiated by the Company, the
Company shall have the right to designate the managing underwriter in any
underwritten offering.
2.6 Expenses of Registration.
The Company shall bear the expense of any registrations effected
pursuant to Sections 2.1, 2.2 and 2.3 including, without limitation, all
registration and filing fees (including all expenses incident to filing with the
NASD), fees and expenses of complying with securities and blue sky laws,
printing expenses, and fees and expenses of the Company's counsel and
accountants; provided, however, that each Holder participating in such
registration shall pay its pro rata portion (on the basis of the number of
shares so registered) of discounts or commissions payable to any underwriter.
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2.7 Registration Procedures.
If and whenever the Company is under an obligation pursuant to the
provisions of this Agreement to use its best efforts to effect the registration
of any Registrable Securities, the Company shall, as expeditiously as
practicable:
(a) with respect to a registration under Sections 2.l, 2.2 and 2.3,
use its best efforts to cause a registration statement that registers such
Registrable Securities to become and remain effective for a period of 120 days
or until all of such Registrable Securities have been disposed of (if earlier)
(the "Effectiveness Period");
(b) furnish, at least five business days before filing a registration
statement that registers such Registrable Securities, a prospectus relating
thereto or any amendments or supplements relating to such a registration
statement or prospectus, to each Holder, to any counsel to any Holder selling
Registrable Securities (the "Selling Holder") and to one counsel selected by the
holders of a majority of such Registrable Securities (the "Selling Holders'
Counsel"), copies of all such documents proposed to be filed, and such other
documents as they may reasonably request in order to facilitate the disposition
of Registrable Securities owned by such Holders (it being understood that such
five-business-day period need not apply to successive drafts of the same
document proposed to be filed so long as such successive drafts are supplied to
such counsel in advance of the proposed filing by a period of time that is
customary and reasonable under the circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
at least the periods set forth in Section 2.7(a) or until all of such
Registrable Securities have been disposed of (if earlier) and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of such Registrable Securities;
(d) notify in writing any counsel to any Selling Holder and the
Selling Holders' Counsel promptly (i) of the receipt by the Company of any
notification with respect to any comments by the Commission with respect to such
registration statement or prospectus or any amendment or supplement thereto or
any request by the Commission for the amending or supplementing thereof or for
additional information with respect thereto, (ii) of the receipt by the Company
of any notification with respect to the issuance by the Commission of any stop
order suspending the effectiveness of such registration statement or prospectus
or any amendment or supplement thereto or the initiation or threatening of any
proceeding for that purpose and (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification of such
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purposes;
(e) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller of Registrable Securities reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller of Registrable Securities to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller; provided,
however, that the
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Company will not be required to qualify generally to do business, subject itself
to general taxation or consent to general service of process in any jurisdiction
where it would not otherwise be required so to do but for this paragraph (e);
(f) furnish to each seller of such Registrable Securities such number
of copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as such Holder may reasonably request in order to facilitate the
public sale or other disposition of such Registrable Securities;
(g) use its best efforts to cause such Registrable Securities to be
registered with or approved by such other governmental agencies or authorities
as may be necessary by virtue of the business and operations of the Company to
enable the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(h) notify on a timely basis each seller of such Registrable
Securities at any time when a prospectus relating to such Registrable Securities
is required to be delivered under the Securities Act within the appropriate
period mentioned in paragraph (a) of this Section, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing
and, at the request of such seller, prepare and furnish to such seller a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the offerees
of such shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(i) make available for inspection by any counsel to any Selling Holder
and the Selling Holders' Counsel or any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent retained by any such underwriter (collectively, the
"Inspectors"), all pertinent financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information (together with the Records, the "Information") reasonably
requested by any such Inspector in connection with such registration statement.
Any of the Information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, shall
not be disclosed by the Inspectors unless (i) the disclosure of such Information
is necessary to avoid or correct a misstatement or omission in the registration
statement, (ii) the release of such Information is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or (iii) such
Information has been made generally available to the public. The seller of
Registrable Securities agrees that it will, upon learning that disclosure of
such Information is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Information deemed confidential;
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(j) use its best efforts to obtain from its independent certified
public accountants "comfort" letters in customary form and at customary times
and covering matters of the type customarily covered by comfort letters;
(k) use its best efforts to obtain from its counsel an opinion or
opinions in customary form;
(l) provide a transfer agent and registrar (which may be the same
entity and which may not be the Company) for such Registrable Securities;
(m) issue to any underwriter to which any seller of Registrable
Securities may sell shares in such offering certificates evidencing such
Registrable Securities;
(n) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Subject to the
provisions of this agreement, each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement;
(o) list such Registrable Securities on any national securities
exchange on which any shares of the Common Stock are listed or on NASDAQ if then
included, or if the Common Stock is not listed on NASDAQ or any other United
States national securities exchange, use its best efforts to qualify such
Registrable Securities for inclusion on such national securities exchange or
NASDAQ as the holders of a majority of such Registrable Securities shall
request;
(p) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission; and
(q) use its best efforts to take all other steps necessary to effect
the registration of such Registrable Securities contemplated hereby.
2.8 Indemnification.
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, each of its officers and directors, members, partners
and legal counsel and each Person controlling such Holder within the meaning of
Rule 12b-2 of the General Rules and Regulations under the Exchange Act, with
respect to which registration, qualification or compliance has been effected
pursuant to this Agreement, and each underwriter, if any, and each Person who
controls any underwriter within the meaning of Rule 12b-2 of the General Rules
and Regulations under the Exchange Act, against all expenses, claims, losses,
damages or liabilities (joint or several) (or actions or proceedings in respect
thereof, including but not limited to any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus (including any preliminary
prospectus or final prospectus), offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements
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therein, not misleading, or any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse each
such Holder, each of its officers and directors, members, partners and legal
counsel and each Person controlling such Holder, each such underwriter and each
Person who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing, settling or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by such
Holder, controlling Person or underwriter and stated to be specifically for use
therein. Notwithstanding the foregoing, insofar as the foregoing indemnity
relates to any such untrue statement (or alleged untrue statement) or omission
(or alleged omission) made in the preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the final prospectus filed with
the Commission pursuant to Rule 424(b) of the Commission, the indemnity
agreement herein shall not inure to the benefit of any underwriter if a copy of
the final prospectus filed pursuant to Rule 424(b) was not furnished to the
Person or entity asserting the loss, liability, claim or damage at or prior to
the time such furnishing is required by the Securities Act.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, officers and legal counsel, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each Person who controls the Company or such underwriter within the
meaning of Rule 12b-2 of the General Rules and Regulations under the Exchange
Act, and each other such Holder, each of its officers, partners, members,
directors and legal counsel and each Person controlling Holder within the
meaning of Rule 12b-2 of the General Rules and Regulations under the Exchange
Act, against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading and will reimburse the
Company, such Holders, such directors, officers, legal counsel, Persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein. Notwithstanding the foregoing, the liability of each Holder under this
subsection (b) shall be limited in an amount equal to the net proceeds from the
sale of the Registrable Securities sold by such Holder. In addition, insofar as
the foregoing indemnity relates to any such untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in the preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the Commission
at
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the time the registration statement becomes effective or in the final prospectus
filed pursuant to Rule 424(b) of the Commission, the indemnity agreement herein
shall not inure to the benefit of the Company, any underwriter or (if there is
no underwriter) any Holder if a copy of the final prospectus filed pursuant to
Rule 424(b) was not furnished to the Person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act.
(c) Each party entitled to indemnification under this Section 2.8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action, and provided, further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
separate and different defenses. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. No Indemnified Party shall consent to entry of any
judgment or enter into any settlement without the consent of each Indemnifying
Party (which consent shall not be unreasonably withheld). Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 2.8 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any losses, claims, damages, expenses or liabilities referred to
therein, then each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages, expenses or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and all stockholders offering securities in the offering (the "Selling
Shareholders") on the other in connection with the statements or omissions which
resulted in such losses, claims, damages, expenses or liabilities, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and the Selling Shareholders on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Selling Shareholders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Selling Shareholders agree that it would not be just and equitable if
contribution pursuant to this Section 2.8(d) were based solely upon the number
of entities from whom contribution was requested or by any other method of
allocation which does not take account of the equitable
10
considerations referred to above in this Section 2.8(d). The amount paid or
payable by an Indemnified Party as a result of the losses, claims, damages,
expenses and liabilities referred to above in this Section 2.8 (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim, subject to the provisions of Section 2.8(c) hereof. Notwithstanding
the provisions of this Section 2.8(d), no Selling Shareholder shall be required
to contribute any amount or make any other payments under this Agreement which
in the aggregate exceed the proceeds received by such Selling Shareholder. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with an underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section 2.8
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement.
2.9 Underwriting Agreement.
Notwithstanding the provisions of Sections 2.7 and 2.8, to the extent
that the Company and the Holders selling Registrable Securities in a proposed
registration shall enter into an underwriting or similar agreement, which
agreement contains provisions covering one or more issues addressed in such
Sections, the provisions contained in such Sections addressing such issue or
issues shall be superseded with respect to such registration by such other
agreement.
2.10 Information by Holder.
Each Holder selling Registrable Securities in a proposed registration
shall furnish to the Company such written information regarding such Holder and
the distribution proposed by such Holder as the Company may reasonably request
in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
2.11 Transfer of Registration Rights.
The rights granted to a Holder under this Section 2 may be assigned to
a transferee or assignee in connection with any transfer or assignment of
Registrable Securities by a Holder provided that (i) either (x) such transferee
or assignee is a subsidiary, parent, general partner, limited partner, retired
partner, member of retired member of the Holder, or (y) such transfer may
otherwise be effected in accordance with applicable securities laws; and (ii)
the Holder notifies the Company in writing of the transfer or assignment,
stating the name and the address of the transferee or assignee and identifying
the securities with respect to which such registration rights are being
transferred or assigned and the assignee or transferee agrees in writing to be
bound by the provisions of this Agreement.
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2.12 Termination of Registration Rights.
The registration rights granted pursuant to this Agreement shall
terminate as to any Holder at such time as such Holder may sell under Rule
144(k) all Registrable Securities then held by such Holder.
2.13 Delay of Registration; Furnishing of Information.
No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
2.14 Amendment of Registrable Rights.
Any provision of this Section 2 may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Holders of at least sixty-six and two-thirds percent (66-2/3%) of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.15 Limitation on Subsequent Registration Rights.
After the date of this Agreement, the Company shall not, without the
prior written consent of the Holders of sixty-six and two-thirds percent
(66-2/3%) of the Registrable Securities then outstanding, enter into any
agreement with any holder or prospective holder of any securities of the Company
that would grant such holder registration rights senior to those granted to the
Holders hereunder.
2.16 Liquidated Damages.
If (i) a registration statement covering applicable Registrable
Securities is not filed on or before the applicable dates set forth in this
Agreement (if the Company files such registration statement without affording
the Holders the opportunity to review and comment on the same as required by
Section 2.7(b) hereof, the Company shall not be deemed to have satisfied this
clause (i)), or (ii) a registration statement covering applicable Registrable
Securities is not declared effective by the Commission on or before the
applicable Effectiveness Date (any such failure or breach being referred to as
an "Event," and the date on which such Event occurs being referred to as an
"Event Date"), then, in any such case, as partial relief for the damages
suffered therefrom by the Holders (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall, on the Event
Date and on the first day of each month following the Event Date until the
triggering Event is cured, pay to each Holder an aggregate amount, in cash, as
liquidated damages and not as a penalty, equal to an amount equal to two percent
(2%) (the "Applicable Percentage") of $2,200.00, which is the aggregate fair
market value of the Shares on the date hereof (calculated as 500,000 Shares
times the closing price per share of Company Common Stock on the American Stock
Exchange on the last trading date immediately preceding the date hereof ("Share
Market Value")) (the "Liquidated Damages").
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The Liquidated Damages shall be payable for each month, or prorated for each
portion thereof, that an Event has occurred and is continuing. In addition, for
each month, or portion thereof, after the first month that Liquidated Damages
are required to be paid hereunder, the Applicable Percentage shall be increased
by one percentage point (for example, Liquidated Damages shall equal 2% of the
Share Market Value for the first month following an Event Date, 3% of the Share
Market Value for the next month, and so on until the Event has been cured).
Notwithstanding the foregoing, aggregate Liquidated Damages shall not exceed
$100,000. The payments to which a Holder shall be entitled pursuant to this
Section are referred to herein as "Registration Delay Payments." Registration
Delay Payments shall be calculated on a cumulative basis. If the Company fails
to make Registration Delay Payments in a timely manner, such Registration Delay
Payments shall bear interest at the rate of 2.0% per month (or the maximum rate
permitted by law), pro-rated for partial months, until paid in full.
Section 3. Miscellaneous.
3.1 GOVERNING LAW.
(a) ALL QUESTIONS CONCERNING THE CONSTRUCTION, INTERPRETATION AND
VALIDITY OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE (WHETHER IN THE STATE OF NEW YORK OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) THE PARTIES TO THIS AGREEMENT AGREE THAT JURISDICTION AND VENUE IN
ANY ACTION BROUGHT BY ANY PARTY HERETO PURSUANT TO THIS AGREEMENT MAY BE BROUGHT
IN ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF NEW YORK. BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE
JURISDICTION OF SUCH COURTS FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY WITH
RESPECT TO SUCH ACTION. THE PARTIES HERETO IRREVOCABLY AGREE THAT VENUE WOULD BE
PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN
IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION.
(c) THE COMPANY HEREBY AGREES THAT SERVICE UPON THEM BY REGISTERED OR
CERTIFIED MAIL (RETURN RECEIPT REQUESTED) SHALL CONSTITUTE SUFFICIENT NOTICE.
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE LENDERS TO BRING PROCEEDINGS
AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
(d) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN
13
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT, THE NOTE
DOCUMENTS OR ANY DOCUMENTS RELATED THERETO.
3.2 Successor and Assigns.
Except as otherwise provided herein, the provisions hereof shall inure
to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto, except that the Company
shall not assign its rights or obligations hereunder without the consent of the
Holders of a majority in interest of the aggregate of the then outstanding
Registrable Securities, except in the event of a merger or a sale of all or
substantially all of the Company's assts.
3.3 Effectiveness.
This Agreement shall be effective upon the date first set forth above.
3.4 Adjustments for Stock Splits, Etc.
Wherever in this Agreement there is a reference to a specific number
of Shares or Registrable Securities of the Company of any class or series, then,
upon the occurrence of any subdivision, combination or stock dividend of such
class or series of stock, the specific number of shares so referenced in this
Agreement shall automatically be proportionally adjusted to reflect the effect
on the outstanding shares of such class or series of stock by such subdivision,
combination or stock dividend.
3.5 Remedies.
In the event of a breach by the Company or by a Holder, of any of
their obligations under this Agreement, the Holder or the Company, as the case
may be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Holder agree that monetary damages, including the Liquidated Damages provided in
Section 2.16 herein, would not provide adequate and full compensation for any
losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
3.6 Entire Agreement; Amendment.
(a) This Agreement constitutes the full and entire understanding and
agreement between the parties with regard to the subject hereof.
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(b) Except as expressly provided herein, neither this Agreement nor
any term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought; provided, however,
subject to Sections 2.14 and 2.15 that any provisions hereof may be amended,
waived, discharged or terminated upon the written consent of the Company and the
Holders of a majority in interest of the aggregate of the then outstanding
Registrable Securities; and provided, further, notwithstanding anything to the
contrary in this Agreement that any such amendment, waiver, discharge or
termination that would adversely affect the material rights hereunder of any
Holder, in its capacity as such, without similarly affecting the rights
hereunder of all of the Holders may not be made without the prior written
consent of such adversely affected Holder.
3.7 Notices, Etc.
All notices, demands and requests of any kind to be delivered to any
party hereto in connection with this Agreement shall be (a) delivered
personally, (b) sent by nationally-recognized overnight courier, (c) sent by
first class, registered or certified mail, return receipt requested or (d) sent
by facsimile, in each case to such party at its address as follows:
(i) if to the Company, to:
Frontline Communications Corporation
Xxx Xxxx Xxxx Xxxxx
X.X. Xxx 0000
Xxxxx Xxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxx-Xxxxxxxx
Telephone No.: 000-000-0000
Telecopier No.: 000-000-0000
if to the Lender, to:
IIG Equity Opportunities Fund Ltd.
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
Telephone: 000-000-0000
Telecopier: 000-000-0000
Any notice, demand or request so delivered shall constitute valid
notice under this Agreement and shall be deemed to have been received (A) on the
day of actual delivery in the case of personal delivery, (B) on the next
Business Day after the date when sent in the case of delivery by
nationally-recognized overnight courier, (C) on the fifth Business Day after the
date of deposit in the U.S. mail in the case of mailing or (D) upon receipt in
the case of a facsimile transmission. Any party hereto may from time to time by
notice in writing served upon the other as aforesaid designate a different
mailing address or a different person to which all such notices, demands or
requests thereafter are to be addressed.
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3.8 Delays or Omissions.
Except as expressly provided herein, no delay or omission to exercise
any right, power or remedy accruing to any party upon any breach or default of
another party under this Agreement shall impair any such right, power or remedy
of such party that is not in breach or default nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any party of any breach or default under
this Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
3.9 Severability.
In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
3.10 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for
convenience only and are not considered in construing or interpreting this
Agreement.
3.11 Gender.
As used herein, masculine pronouns shall include the feminine and
neuter, and neuter pronouns shall include the masculine and the feminine.
3.12 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this agreement effective
upon the date first set forth above.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this agreement effective
upon the date first set forth above.
FRONTLINE COMMUNICATIONS CORPORATION
By: /s/
------------------------------------
Xxxxxxx X. Xxxx-Xxxxxxxx
Chief Executive Officer
IIG EQUITY OPPORTUNITIES FUND LTD.
By: /s/ Xxxxxx Sandmu
------------------------------------
Name: Xxxxxx Sandmu
Title:
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